PIS Account for NRI

Investing in stock exchanges and trades has gained remarkable traction in recent times, drawing attention from individuals worldwide. A significant advancement is the provision that now enables Non-Resident Indians (NRIs) to participate in the buying and selling of shares and debentures of Indian companies.

To make such investments, it is necessary to open a PIS account for NRI first. The Portfolio Investment Scheme (PIS) is a pathway for NRIs to invest in Indian stock exchanges, provided they strictly adhere to Government regulations. 

But what is PIS account and how can one open it?

In this article, we will explore the full form of PIS, its definition, distinctive features, eligibility prerequisites, the documents required to open the account, and various other associated aspects. With all this information, we will simplify the complexities involved in a PIS account for potential NRI investors.

What is PIS Account?

The Portfolio Investment Scheme (PIS) was established by the Reserve Bank of India (RBI) to help Non-Resident Indians (NRIs) invest in Indian stocks and bonds conveniently. It operates under Schedule 3 of the Foreign Exchange Maintenance Act, 2000, ensuring stringent oversight of all investments in the stock market, whether they are credits or debits.

To start investing under this scheme, NRIs are required to set up a PIS-enabled NRE (Non-Resident External) or NRO (Non-Resident Ordinary) account with any bank designated for this purpose.

Investments made through PIS can be on a repatriation basis, where the investor can transfer funds back to their home country, or on a non-repatriation basis, where the funds remain in India. This scheme simplifies the investment process for NRIs while guaranteeing compliance with all the requisite legal and financial norms.

Advantages of PIS Account

The PIS account provides remarkable benefits to Non-Resident Indians (NRIs) who wish to invest in the Indian stock market. This account not only simplifies the investment process but also provides a regulated pathway for investing in a range of financial instruments.

Here are some advantages that come with having a PIS account -

• Diverse Investment Opportunities: With a PIS account, NRIs can invest in shares and bonds of companies that are listed on the stock exchange, expanding their investment horizons.
• Access to Futures and Options: It allows investments in futures or options, traded through recognised stock exchanges, on a non-repatriation basis (subject to the regulatory limits set by RBI).
• Regulated Investment Limits: RBI imposes and monitors daily ceilings on the number and type of shares in your portfolio for structured investment. 
• Continuity for Newly Converted NRIs: Individuals changing their status from resident Indian to NRI can continue to hold their share securities on a non-repatriation basis, ensuring investment continuity.
• Single Bank Transactions: PIS account holders are required to channel all their transactions under the scheme through one designated bank for streamlined and centralised management of investments. This is applicable to both NRE and NRO accounts.

Other Key Benefits of PIS Account

A Portfolio Investment Scheme (PIS) account provides several key benefits to Non-Resident Indians (NRIs) that go beyond facilitating investments in the Indian stock market. Here’s a straightforward breakdown of some of these additional advantages:

1.) Ease of Transactions: For NRIs, managing physical transactions can be challenging. A PIS account mitigates this and provides a seamless transaction experience within the established rules and regulations.

2.) Value-Added Service – Enhanced Set-off Facility: Tailored to suit NRIs, the PIS account comes with an Enhanced Set-off facility that allows NRIs to save on Capital Gains Tax by offsetting current losses against future profits. 

Here’s how it works:

• Loss set-off is allowed only against future profits, not against previous ones.
• Losses can be carried over to the last day of the financial year or until they are offset.
• Profits cannot be carried forward, and Capital Gains Tax is applied to the net profit.
• This facility is available at the portfolio level throughout the financial year.

3.) Cost-Efficient Transactions: Since all stock investment transactions are necessarily routed through the PIS account, the transaction costs are kept to a minimum. This is another feature that makes it an attractive option for investment.

How Does the PIS Account Work?

As we saw earlier, a Portfolio Investment Scheme (PIS) account facilitates seamless investment in the Indian stock market for Non-Resident Indians (NRIs).

But how does this specialised account operate?

Here’s a simplified explanation of how the PIS account works for interested NRIs -

• Investment Basis: NRIs can freely invest in the Indian stock market on either a repatriation or non-repatriation basis using a PIS account.
• Required Accounts: To start share trading, a PIS-enabled NRE (Non-Resident External) or NRO (Non-Resident Ordinary) account is necessary. Funds in the NRE account can be repatriated in total. On the other hand, funds in the NRO account can be repatriated after paying the applicable taxes.
• Application Process: After opening an NRE or NRO account, you must apply to designate this account under PIS using a specific application form. Once approved, all the transactions through this account are reported to the RBI.
• Trading and Demat Accounts: Post-approval, you can commence trading with the sanctioned PIS account, which is linked to the NRI Demat and NRI Trading account so that you can buy and sell shares and securities.
• Regulation and Compliance: Every transaction made through a PIS account is under the strict vigilance of the RBI, ensuring that all the trades comply with the existing regulations and guidelines.

Eligibility Criteria for PIS Account

Opening a PIS account allows Non-Resident Indians (NRIs) and Persons of Indian Origin (PIOs) to invest in Indian stock markets.

However, it is crucial to understand who qualifies for this account as per the Reserve Bank of India (RBI) guidelines. There are specific limitations and exclusions in place, so that only eligible individuals can avail of this scheme.

Note: It’s essential for prospective applicants to thoroughly review these criteria to determine their eligibility before proceeding to open a PIS account for a smooth and compliant investment journey in the Indian financial markets.

Documents Required to Open a PIS Account

Keep the following documents ready while opening a PIS account –

For Non-Resident Indians

• FATCA
• Proof of Address – both Indian and Overseas
• Recent coloured photographs
• Copy of valid passport
• PAN card
• NRI status proof
• C-KYC

In addition to the above documents, a Person of Indian Origin (PIO) will be required to submit the following documents as well -

• PIO declaration form (filled and completed)
• PIO status card

Charges Associated with PIS Account

When utilising a Portfolio Investment Scheme (PIS) account, it’s important to be aware that certain charges are associated with its services. These charges are bank-specific and can vary, so it’s essential to confirm the details with your respective bank. 

Here are some of the typical fees involved with a PIS account for NRIs-

• PIS Issuance Charges: This is a one-time fee paid when applying for the PIS account. It’s essential to inquire about this charge with your bank when setting up the account.
• PIS Account Maintenance Charge:  Banks levy a maintenance fee at defined intervals to cover the costs of maintaining your PIS account. It’s crucial to be aware of the frequency and amount of this charge.
• PIS Reporting Charge: For every trade date, a reporting charge is applied separately for purchase and sale transactions, regardless of the transacted value or quantity of shares.

Key Takeaways

• The Portfolio Investment Scheme (PIS) account is a specialised structure established by the RBI that allows Non-Resident Indians (NRIs) and Persons of Indian Origin (PIO) to invest in Indian stocks and bonds. This scheme aims at simplifying the investment process in Indian stock exchanges.
• While NRIs and PIOs can open a PIS account, certain restrictions apply. Individuals traveling abroad for medical treatment or short trips, residents of certain countries, and mariners employed by Indian shipping companies are not eligible.
• PIS accounts enable investments on both repatriation and non-repatriation basis through PIS-enabled NRE or NRO accounts. All transactions are closely monitored by the RBI for compliance.
• The utilisation of PIS accounts involves various charges such as issuance charges, account maintenance charges, and reporting charges. These charges can vary and are specific to banks.