The process of investment in the Indian market is slightly different for Non-Resident Indians (NRIs) than regular Indians. They have to follow a certain regulatory structure. In this sequence, the Portfolio Investment Scheme (PIS) is a notable factor. Understanding what PIS is becomes crucial at this point. It defines how NRIs can buy and sell shares on Indian stock exchanges through their banking accounts in compliance with FEMA and SEBI guidelines.
The PIS is not just a regulatory formality; it is the mechanism that determines how sale proceeds are routed, whether the investment is repatriable and how tax compliance is linked to capital gains repatriation. Knowing what PIS is and how it works ensures that NRI equity investments are structured correctly from the outset rather than requiring correction later.
What Is PIS?
The Portfolio Investment Scheme is an RBI designated framework under which NRIs can purchase and sell shares and convertible debentures of Indian companies on a recognised Indian stock exchange.
- PIS is governed by the RBI under FEMA and is the only route through which NRIs can trade on Indian stock exchanges using funds in India
- NRIs must register for PIS with a designated bank. Only one bank can be the designated PIS bank at any point in time for a given NRI
- All equity transactions under PIS are routed through the designated PIS bank account. A separate account maintained specifically for PIS related transactions
- The PIS bank maintains a record of all equity transactions and ensures that the NRI’s holdings do not breach applicable sectoral investment limits under FEMA
- Understanding what PIS is is essential before initiating any NRI equity market investment through an NRE or NRO Account linked Demat Account
The Two Types of PIS Accounts
The next step is knowing which type of PIS account is appropriate for your investment structure.
- NRE PIS Account: Investments are made using funds in the NRE Account, sale proceeds are credited back to the NRE Account and are fully repatriable
- NRO PIS Account: Investments are made using funds in the NRO Account, sale proceeds are credited to the NRO Account and are subject to the standard NRO repatriation rules
- The choice between NRE and NRO PIS depends on the source of investment funds, foreign earnings routed through the NRE Account or Indian income managed through the NRO Account
- An NRI can maintain both types of PIS accounts, but must ensure all transactions are correctly routed through the appropriate account type
How PIS Works in Practice
It is definitely useful if you understand the functioning of a platform that you are using. Here is how PIS works:
- When an NRI places a buy order, funds are debited from the PIS account linked to the designated NRE or NRO bank account
- When an NRI places a sell order, proceeds net of applicable TDS and brokerage are credited back to the same PIS account
- The designated PIS bank reports all transactions to the RBI periodically, maintaining the transparency required under the FEMA framework
- Sectoral investment limits for NRIs are monitored at the company level and the PIS bank ensures compliance before each purchase is processed
Tax Compliance on Gains From PIS Investments
Capital gains arising from equity investments made under PIS are taxable in India under the Income Tax Act, 2025.
- Short-term capital gains from equity sales under PIS are taxable at applicable rates. The holding period determines whether the gain is short-term or long-term
- TDS is deducted at applicable rates on capital gains at the time of sale and is deposited with the Income Tax Department under the NRI’s PAN
- NRIs can claim DTAA benefits to reduce TDS where India has a tax treaty with their country of residence. A Tax Residency Certificate is required
- Form 168 reflects all TDS deducted on PIS transactions and is used during ITR filing to reconcile actual tax liability with TDS already paid
Repatriation of PIS Gains Through the NRE Account
One of the key advantages of PIS and using an NRE Account-linked PIS structure is the repatriability of proceeds.
- Sale proceeds credited to an NRE Account-linked PIS account are part of the NRE Account balance and are fully and freely repatriable under FEMA
- There is no annual repatriation cap on NRE Account funds. Any amount can be transferred to an overseas account at any time
- For NRO Account-linked PIS investments, repatriation of sale proceeds falls under the USD 1 million per financial year capital income repatriation limit
- Planning the investment through the NRE Account PIS route from the outset avoids the more complex documentation and annual limit constraints of the NRO route
Setting Up a PIS Account
Setting up a PIS account is a structured process that must be completed before any equity trading activity can begin.
- Approach a scheduled commercial bank offering PIS facilities. Only one bank can serve as the designated PIS bank at any time
- Complete the PIS application along with the required KYC documentation; passport, overseas address proof and PAN card are typically required
- The bank registers the PIS account with the RBI and issues a PIS permission letter. This letter is required to open the Demat and trading accounts
Final Thoughts
Understanding what PIS is is foundational for any NRI looking to invest in Indian equity markets in a FEMA-compliant, tax-managed, and repatriation-ready structure. The PIS framework, when combined with the right NRE or NRO Account setup, provides a clear and structured path from investment to the realisation of gains and, ultimately, repatriation. Financial institutions such as ICICI Bank support NRIs throughout the PIS registration and account setup process as part of their NRI banking offerings.