NRI willing to invest in the Indian stock market needs to open a PIS account. This account is also known as a PINS account. We have already discussed NRE and NRO accounts, in this post, we will discuss the essential steps to open a Portfolio Investment Scheme (PIS) account, which allows NRIs to invest in the Indian stock market easily.
PIS or PINS account, approved by RBI, is available for NRIs to trade in the secondary markets like BSE or NSE. In other words, As an NRI, you are not allowed to utilize your demat account meant for residents to conduct trades in the Indian stock market. Instead, you must change your account to an NRI demat account connected to your NRO account to aid your trading activities. NRIs are allowed to open only a single PIS or PINS account at a time.
In this extensive manual, we will guide you through all the information necessary for opening a PIS account. We will address the important aspects, including the advantages of having one and the detailed process of how to set it up.
What is a PIS Account?
A Portfolio Investment Scheme account is specifically designed for Non-Resident Indians (NRIs) and Persons of Indian Origin (PIOs) to invest in Indian stock markets. The Portfolio investment scheme account facilitates the purchase and sale of shares and convertible debentures of Indian companies on recognized stock exchanges. It’s regulated by the Reserve Bank of India (RBI) to ensure compliance with investment guidelines.
Why Open a PIS Account?
Advantages
There are multiple benefits to opening a portfolio investment scheme account. Here are a few of them.
Investment & Trading You can do investment or trading in Equity, Mutual Funds, ETFs, and F&O using this account.
Seamless Transactions – This account allows you to invest or trade without any hassle.
Tax Benefits: Investments made through this account are eligible for certain tax benefits under Indian law.
Repatriation: You can repatriate the sale proceeds of your investments.
Regulatory Compliance: Ensures all your transactions are compliant with RBI regulations.
Who Needs a PIS Account?
If you are an NRI or a PIO looking to invest in Indian stock markets, you need a PIS account. This account is crucial for ensuring your investments are legal and properly monitored.
How to Open a Portfolio Investment Scheme (PIS) Account
Step-by-Step Guide
Creating a PIS account may seem challenging, but it becomes simple once you understand the process. Here is the step-by-step process –
- Choose a Bank: The first step is to choose a bank authorized by the RBI to open PIS accounts. Not all banks offer this service, so make sure you select one that does.
- Documentation: Gather the required documents. Typically, you’ll need:
- Passport-sized photographs
- Copy of your passport
- Copy of your visa
- Proof of overseas address
- PAN card copy
- FEMA declaration form
- Fill Out the Application Form: Each bank will have its specific application form for a PIS account. Fill it out carefully and accurately.
- Submit the Documents: Once you’ve completed the form, submit it along with the required documents to the bank.
- NRE/NRO Account: Ensure you have a Non-Resident External (NRE) or Non-Resident Ordinary (NRO) account with the bank. The PIS account is linked to these accounts.
- Approval and Setup: The bank will review your application and documents. If everything is in order, they will open your PIS account and link it to your NRE/NRO account.
- Trading Account: Finally, you’ll need to open a trading account with a registered broker to start buying and selling shares.
Things to Keep in Mind
- Transaction Limits: There are certain limits on the amount you can invest and repatriate, so be aware of these restrictions.
- Compliance: Ensure all your transactions comply with RBI regulations to avoid penalties.
- Fees and Charges: Different banks have varying fee structures for PIS accounts. Check these out before opening an account.
Tax Implication – Capital Gain Tax
NRIs are required to pay taxes on any earnings derived from investments in the Indian stock market. When it comes to capital gains taxation, the tax treatment for NRIs is in line with that for Resident Indians.
| Investment gains from asset | Holding period | Rate of tax |
| Equity shares listed on NSE/BSE and subject to Securities Transaction Tax (STT) Equity-oriented mutual funds (equity allocation is 65% or more). | > 12 months (Long-term capital gain) Up to 12 months | Any gain above ₹1 lakh is taxed at 10% + applicable surcharge and cess 15% + applicable surcharge and cess |
| Debt-oriented mutual fund (equity allocation is less than 65%) purchased before April 1, 2023. | > 36 months (Long-term capital gain) Up to 36 months | 20% + applicable surcharge and cess with indexation As per your income tax slab |
| Specified Mutual funds purchased on or after April 1, 2023. (Equity allocation is up to 35%). | Short-term capital gain (irrespective of its holding period) | As per your income tax slab |
| Interest and Dividends | Not applicable | As per your income tax slab |
Common FAQs
What is the difference between a PIS account and a regular trading account?
A PIS account is specifically for NRIs to invest in Indian stock markets and is regulated by the RBI. A regular trading account, on the other hand, is for resident Indians and does not have the same compliance requirements.
Can I have multiple PIS accounts?
No, you can only have one PIS account linked to either an NRE or NRO account at any given time.
What are the tax implications of investing through a PIS account?
Investments made through a PIS account are subject to capital gains tax in India. The exact tax rate depends on the duration of the investment and the type of asset.
How long does it take to open a PIS account?
The process usually takes about 2-3 weeks, depending on the bank and the completeness of your documentation.
Can I transfer funds between my NRE/NRO account and PIS account?
Yes, funds can be transferred between your NRE/NRO account and PIS account for the purpose of investment and repatriation of sale proceeds.
Conclusion
Opening a PIS account is an essential requirement for NRIs and PIOs who wish to participate in the Indian stock market. At first, it may appear complex, however, with the correct knowledge and support, you can smoothly maneuver through the process. Don’t forget to select a dependable bank, collect all required paperwork, and make sure you’re adhering to RBI guidelines. Having your PIS account set up will put you on the right track to discovering the countless investment possibilities that India provides.
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