What is Portfolio Investment Scheme?

Introduction

NRIs seeking to invest in Indian stock market often encounter requests for a "PIS account" from brokers and banks. This is an additional account that must be opened, mandatorily after setting up an NRE account and completing KYC procedures.

The Portfolio Investment Scheme (PIS) serves as the regulatory gateway for NRIs to access Indian equity markets. Kotak has streamlined this process to facilitate efficient movement from application to active investment, while ensuring complete compliance with RBI regulations that safeguard both investments and India's financial framework.

Table of Contents

• What is a PIS Account?
• What Are the Types of PIS Accounts Available?
• What Investment Options and Restrictions Apply to PIS Accounts?
• How Do NRIs Apply for a PIS Account and What Documentation is Required?
• What Benefits Do PIS Accounts Offer NRI Investors?
• Conclusion
• Frequently Asked Questions

What is a PIS Account?

A Portfolio Investment Scheme (PIS) account is a specialised banking facility that enables Non-Resident Indians (NRIs), Persons of Indian Origin (PIOs), and Foreign Institutional Investors (FIIs) to trade in shares and convertible debentures of Indian companies through recognised stock exchanges.

The Reserve Bank of India (RBI) established PIS under the Foreign Exchange Management Act (FEMA) to regulate and monitor foreign investments in Indian capital markets.

A PIS account functions as a designated account linked to either an NRE savings account or an NRO savings account. When trades are executed through registered stockbrokers, all transactions receive automatic reporting to the RBI through designated bank branches. This reporting mechanism ensures compliance with foreign investment regulations and helps track aggregate NRI investment in individual companies.

The PIS framework enables investment in India through direct equity investments, IPO subscriptions, and secondary market trading, all while maintaining clear documentation for tax and repatriation purposes.

What Are the Types of PIS Accounts Available?

NRIs can access two distinct types of PIS accounts depending on funding sources and repatriation requirements:

• NRE PIS Account (Repatriable Basis): This account allows investment of foreign earnings brought into India through NRE accounts. Both original investments and profits can be freely repatriated to overseas bank accounts without RBI approval. Funds transferred from abroad convert to rupees at prevailing exchange rates, with no limits on amounts that can be sent back overseas.
• NRO Securities Account (Non-Repatriable Basis): Linked to NRO accounts, this route facilitates investment of Indian-sourced income such as rental earnings, dividends, or sale proceeds from Indian assets. Repatriation from NRO securities accounts is limited to USD 1 million per financial year and requires additional documentation, including Form 15CA/15CB for tax clearance.

What Investment Options and Restrictions Apply to PIS Accounts?

The portfolio investment scheme provides access to most listed Indian securities while maintaining specific investment thresholds:

• Individual Investment Limits: NRIs can purchase up to 5% of any company's paid-up capital through a PIS account. This limit applies per individual across all PIS transactions.

Know more about Different Investments Options for NRIs

• Collective NRI Investment Caps: All NRI combined investment cannot exceed 10% of a company's paid-up capital, though this can increase to 24% with company approval. The RBI monitors these thresholds daily and maintains caution lists when aggregate holdings approach the limits.
• Permitted Investments: PIS accounts allow investments in equity shares, convertible debentures, and participation in IPOs of listed Indian companies. Trading on BSE, NSE, and other recognised exchanges through registered stockbrokers is permitted.
• Investment Restrictions: Certain sectors remain off-limits, including real estate businesses (excluding infrastructure), agricultural land, plantation properties, and companies engaged in transferable development rights trading.

How Do NRIs Apply for a PIS Account and What Documentation is Required?

Opening a PIS account requires working with an RBI-authorised dealer bank that has designated branches for PIS services. Here's the streamlined process:

• Application Process: The process begins with establishing an existing NRE or NRO savings account with the chosen bank. Applicants submit the PIS application form specifying repatriation or non-repatriation basis. The bank designates the savings account for PIS transactions and issues the necessary permission.
• Essential Documentation: Applications require a valid PAN card, passport with relevant visa stamps, overseas address proof, and recent photographs. For FATCA compliance, foreign tax identification numbers are necessary.

• Bank Designation Concept: In NRE accounts, only one PIS account can be maintained with any single authorised dealer bank in India. Bank switching requires closing existing PIS accounts first. However, trading through multiple stockbrokers using the same PIS account is permitted.
• Compliance Requirements: Designated banks handle all regulatory reporting to the RBI on behalf of account holders. They track investment positions, ensure compliance with sectoral limits, and generate necessary certificates for repatriation.

The documentation and application process becomes straightforward when working with banks that have robust NRI services and digital banking capabilities.

What Benefits Do PIS Accounts Offer NRI Investors?

The portfolio investment scheme provides several advantages that simplify overseas investment in Indian markets:

• Regulatory Compliance Made Simple: Designated banks handle all RBI reporting requirements, ensuring account holders remain compliant with FEMA regulations without managing complex paperwork. Banks monitor investment positions against sectoral limits and alert investors to any upcoming thresholds.
• Streamlined Tax Management: Banks compute capital gains tax automatically and deduct TDS during share sales. They provide detailed statements showing cost basis, holding periods, and tax calculations – simplifying annual tax filing processes.
• Investment Tracking and Reporting: PIS accounts offer comprehensive transaction tracking with detailed contract notes and holding statements. Banks provide consolidated reports showing entire portfolio performance, making it easier to make informed investment decisions and track returns.
• Flexible Funding Options: PIS accounts can be funded through foreign remittances, transfers from NRE/FCNR accounts, or Indian income sources (for NRO PIS). This flexibility allows diversification of funding sources based on currency movements and personal financial planning.

• Professional Support: Designated banks provide dedicated relationship managers familiar with NRI investment requirements. They assist with account setup, ongoing compliance, and investment planning tailored to overseas resident status.

These benefits transform what could be a complex regulatory process into a manageable investment journey, allowing focus on building Indian equity portfolios.

Conclusion

A PIS account serves as the essential gateway to Indian stock market investments for NRIs. The scheme provides structured access to equity markets while ensuring regulatory compliance through oversight by designated banks.

Choosing between NRE and NRO routes based on funding sources and repatriation needs, staying within the 5% individual company investment limits, and working with an authorised dealer bank for seamless transactions.

The documentation process, while detailed, becomes straightforward with proper preparation and the right banking partner. Understanding fee structures and repatriation rules helps investors plan investments more effectively and maximise returns.

For NRIs seeking portfolio diversification through Indian equities, PIS accounts offer a regulated, transparent pathway that balances investment freedom with compliance.

The key to success lies in selecting an experienced bank partner who can provide guidance through setup and ongoing management.

Those ready to explore Indian equity markets can benefit from Kotak's NRI investment services, which provide end-to-end support for the PIS account journey—from application to active portfolio management.