Are you an NRI who is planning to invest in direct stocks or other equity options? Indian economy is one of the fastest-growing economy and many NRIs and PIOs are planning to invest in Indian equities, but they are not sure, whether they can invest in India or not? And what is the procedure for investment?
As per rules, an NRI can also invest in direct equities, equity mutual funds or future & options (F&O) in India just like a resident but NRI’s have to open a separate account called as PIS account (portfolio investment scheme account) for investing in direct equities and we will look at that today.
PIS Account (Portfolio investment scheme)
PIS or portfolio investment scheme account is an account to be opened by NRI’s if they want to invest in stocks directly. This PIS account allows NRIs to buy and sell shares and convertible debentures of Indian companies on BSE & NSE by routing such transactions through their NRE/NRO bank account.
How to get PIS Account activated?
- Step 1 – Open an NRE account/NRO account or you may already have it
- Step 2 – You need to ask your bank for PIS form, fill a form ‘Application for designating bank account for PIS’ and submit it to the bank. Bank will send the form to RBI for approval.
- Step 3 – Once approved by the RBI, the requested bank account (NRE or NRO) is designated as PIS Account.
- Step 4 – Your Demat account and the trading account will be linked with the PIS account to enable the buy and sell off stocks at NSE/BSE.
Once your PIS account is linked with a Demat and trading account, you can invest in stocks online.
Non-PIS Account
By default, every NRE/NRO account is a non-PIS account (PIS is not activated). The following are the investments which can happen with the non-PIS account.
- Mutual Funds and IPOs.
- Sale of shares acquired through Right Issues/ ESOP
- Sale of shares received in inheritance
- Sale of shares received in bonus
- Sale of shares bought when NRI was resident Indian.
Many banks make it mandatory to open a separate Non-PIS account along with a PIS Account. They offer 4-in-1 Account which includes:
- NRI Saving Bank Account (Non-PIS)
- NRI Saving Bank Account (PIS)
- NRI Demat Account
- NRI Trading Account
Important points
- Transactions from a Non-PIS account are not reported to the RBI.
- The PIS account cannot be a joint account
- NRIs cannot do intraday trading with the PIS account. NRI’s can’t sell stocks without taking delivery of the shares/convertible debentures purchased.
- Short selling is not permitted under PIS.
- One can have only 1 PIS linked account. If you would like to open a PIS account with another bank, you will have to close the existing PIS account first.
- In the case of POI, the POI card is also required in documentation
- In case your overseas address is not in English, you need to get it translated by a translator in your city and get their stamp
- In case you do not want to travel to India just for making investments, you can always give POA (Power of attorney) to someone trusted who can do the process for you.
3 account to be opened along with PIS account
Note that PIS is mainly permission and not an account in itself. If you want to buy and sell stocks in India, you would need NRE/NRO bank account along with the Demat and Trading account. Below are the details for each of those.
NRE/NRO Saving Bank Account
For any type of investment in India by NRI, whether it be mutual funds, commodities, or stocks, IPO having an NRE or NRO account is mandatory.
- NRE Account – NRE account is a bank account where the money is deposited in Indian as well as foreign currency. You can use the money deposited in it, in the country of your residence or in India. Therefore, it is called as repatriable.
- NRO Account – NRO bank account is only partially repatriable, means you can use the money only in India. And you can only deposit Indian income in this account. It is used to deposit rent, interest, other source income earned from India.
So depending on your situation and income type, you need to open these accounts. One can have any number of NRE/NRO accounts if required.
Many NRIs are using a saving bank account for transacting in India, which is illegal. So, once you become an NRI, you should convert your savings bank account into NRE/NRO account.
These are just marking on the existing saving bank account. One needs to fill a required form and attach required documents like PAN, Identity proof of country of residence, Passport, etc.
Demat Account
Demat account is to hold securities (shares) in electronic format. Unlike most developed countries where equity holding is kept with the broker, in India, they are kept in a separate account called Demat account. The Demat account is a secured online account.
First time NRI investors need to open a Demat account with a registered broker. Various brokers like Zerodha, ICICI, and Axis, IIFL, etc., are available for NRI investors.
Every broker offers different services and charges different fees and brokerage for the same. It is wise to check every detail of the broker before opening a Demat account. To open an NRI Demat account, the following documents are needed to be submitted-
- Bank Account Statement/ Passbook Bank proof should indicate NRE/NRO saving a/c bank details
- Foreign address proof
- Indian Passport
- PAN card
- Photograph of investor
- Canceled bank account cheque
- If NRE or NRO is not mentioned (pre-printed) on the cheque, then bank verification letter is required.
All the photocopies of the KYC document should be attested by any of the entities like Notary Public, any Court, magistrate, judge, Local banker, Indian embassy, Consulate General of the country where NRI is residing.
Trading Account
In addition to a Demat account, an NRI also needs an NRI trading account to trade in stock exchanges i.e. to place buy/sell orders. The documents required to open NRI Trading accounts same as NRI Demat account.
Most brokers offer 2-in-1 account services wherein an NRI can open both trading & Demat account at once. Some stockbrokers who are part of a banking group such as ICICI Direct, HDFC Securities and SBI Capital, etc., offer all services like NRE/NRO account, Demat and Trading accounts are opened at once.
Let us know if you have any more queries related to PIS account? We will be happy to answer them in the comments section