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As a NRI, you can invest in the Indian stock market and bonds through NRE PIS account or NRO no-PIS account. The choice is yours! If you want to invest on a repatriation basis, you must use NRE bank account and obtain RBI PIS permission for investment in Indian equities. Getting PIS approval is mandatory for NRI transactions channeled through NRE bank-linked trading accounts.
Know everything about NRE PIS investment in India including what is PIS account? Is PIS mandatory? How to fund NRE PIS trading and demat account, and the difference between PIS and non-PIS NRI bank account.
PIS or Portfolio Investment Scheme is a mechanism developed by RBI for NRI investment in India. As per section 3 of the Foreign Exchange Management Act (FEMA) 2000, an NRI can purchase and sell shares and convertible debentures of listed Indian companies on the BSE and NSE by channeling their investment through the NRI bank account.
The PIS scheme allows non-residents and PIOs (Persons of Indian Origin) to transact in the Indian equity market.
NRE PIS account is an integrated account of NRI trading and demat account mapped with NRE bank account and NRI PIS account.
Now the question here- is seeking PIS permission mandatory for NRIs?
Yes, PIS account is mandatory for NRI investment on a repatriable mode. NRI who wants to place and execute all transactions through NRE-linked trading account, it is necessary to obtain PIS permission from RBI-authorized banks.
As a NRI, if you want to utilize your overseas earnings or income earned abroad to invest in the Indian market, you must open an NRE bank account in India.
However, PIS is not essential for NRIs who intend to invest on a non-repatriable basis by opening an NRO account in India. As they can still invest in the Indian stock market using NRO no-PIS account. Also invest in primary market or IPOs and mutual funds.
Know more on NRI mutual fund investment
An NRI based on their needs can open either a NRE PIS account or NRO no-PIS account. Here are the differences between NRI PIS and NRI non-PIS accounts:
NRI PIS Account | NRI Non-PIS Account | |
Meaning | Purchase and sell equity shares on a repatriable mode. | Invest in Indian equities and mutual funds on non-repatriable basis. |
Reporting to RBI | All secondary market transactions routed through NRE PIS account are reported to RBI. | In non-PIS account, transactions are not reported to RBI. |
Repatriability | NRE is a repatriable account thus all NRI investment mapped with NRE PIS account can be repatriated overseas. | NRE non-PIS account is repatriable whereas NRO non-PIS account is not fully repatriable as you can remit upto USD 1 million in a financial year. |
Equity investment | NRE and NRO PIS account enables NRIs to invest in Indian companies and debentures listed on recognized stock exchanges: BSE and NSE. | NRE non-PIS account does not allow investment in shares. NRO non-PIS account allows non-residents to invest in stocks. |
Apply for IPOs | PIS account does not permit NRIs to invest in IPOs. | An NRI can apply for IPOs using no-PIS NRE or NRO account. |
F&O | NRO PIS account can be used to trade in equity F&O. Equity derivative trading is not available on NRE PIS account. |
NRO non-PIS account can be used to trade in equity derivatives. |
Mutual Funds | NRI do not need PIS account setup to invest in mutual funds. | NRI can use non-PIS account to invest in mutual funds. |
An NRE PIS account should be open, if you want to:
In India, RBI has authorized banks to allow non-residents to open NRE PIS account. Most of the domestic banks including private and public banks like SBI, HDFC, ICICI, Axis, etc. offers NRE PIS account opening services to NRI clients.
All NRI investments in India are taxable with the only exception that interest credited to your NRE or FCNR account is tax-free while NRO account interest is taxable.
If an NRI generates income from investment in shares, it will be taxed in India, and tax will be deducted at source.
As NRI PIS account is managed by banks they know the credit proceeds from investment in shares and other securities and deduct tax accordingly. The rate of tax is different depending upon the investment holding period.
For instance, if you sell shares within 12 months, profits or capital gain (short-term) will be taxed at 15% while sale proceeds after 12 months will attract 10% long-term capital gain tax. The tax rate will be imposed on the amount of capital gains or profits made by NRI.
NRI cannot invest in the following segment using PIS activated NRI account:
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No, NRI cannot have NRE no-PIS account as it does not permit non-residents to transact in the secondary market or purchase and sell shares of Indian companies.
However, no-PIS NRE account allow NRIs to invest in the primary market means IPOs on a repatriable basis.
Yes, PIS permission from RBI is mandatory for all NRIs who want to invest in Indian stocks using NRE bank account.
No, only the amount of interest credited to an NRE bank account is tax-free.
Otherwise, all profits earned on multiple investment avenues like equity shares, mutual funds, etc. are taxable in India. Profits will be taxed as short-term or long-term capital gain depending upon the investment holding period. Tax will be deducted at source on NRI investment in India.
NRE account in a bank allows NRIs to invest in India on a repatriation basis. It is mandatory for NRIs to get PIS account to invest in Indian equities through an NRE account.
If an NRI gets RBI PIS permission it will be known as an NRE PIS account otherwise called an NRE non-PIS account.
Check out the differences between NRE PIS and NRE non-PIS accounts;
NRE PIS Account | NRE Non-PIS Account | |
Meaning | It combines two accounts; an NRE bank account and PIS account after receiving PIS permission certificate from RBI. | NRI having NRE bank account in India without PIS approval. |
Purpose | Invest foreign income in Indian stock market. | Invest income earned overseas in India like IPOs except stock market investment. |
Equity investment | NRE PIS account holders can buy and sell shares or securities listed on BSE and NSE. | NRE non-PIS account does not allow NRIs to invest in Indian equity market. |
RBI Reporting | All transactions routed through NRE PIS account are immediately reported to RBI. | No transaction is reported to RBI. |
No, NRI can open and operate NRE or NRO or both of these accounts in India. However, they can link any one of them either NRE or NRO to their trading account to invest in Indian investment instruments available to NRIs.