PIS vs Non-PIS Account for NRIs: What You Need to Know

For many NRIs, investing in India starts with a simple but important question: which type of account should you open?

You will usually come across two commonly used terms – PIS and Non-PIS accounts. While both provide access to Indian capital markets, they differ significantly in terms of repatriation of funds, regulatory requirements and the types of investments that can be made through them.

Understanding these differences at the outset can help you structure your investments efficiently and choose the option that best aligns with your financial goals.

What is a PIS Account?

Traditionally, NRIs investing in Indian listed equities on a repatriable basis used the Portfolio Investment Scheme (PIS) route. Although the regulatory framework has evolved over time, the term "PIS Account" continues to be widely used in the industry to refer to NRE-linked investment arrangements that allow repatriation of funds abroad.

A PIS account is generally linked to an NRE (Non-Resident External) account and facilitates investments on a repatriable basis in accordance with RBI regulations.

Key Features of a PIS Account

• Investments are made through an NRE account
• Repatriation of capital and investment proceeds is permitted, subject to applicable regulations
• Investments are routed through designated banking arrangements in accordance with RBI guidelines
• Suitable for NRIs investing using overseas income
• Enables structured tracking of repatriable investments
• Exchange-traded derivatives (F&O) are generally not undertaken through this route

For NRIs who wish to retain the flexibility of moving their investment proceeds abroad, the PIS route remains a preferred option.

What is a Non-PIS Account?

A Non-PIS account is a simpler and more flexible option for NRIs who wish to invest on a non-repatriation basis.

It is generally linked to an NRO (Non-Resident Ordinary) account and involves fewer operational formalities compared to the traditional PIS route.

Key Features of a Non-PIS Account

• No separate PIS registration requirement
• Lower operational and compliance costs
• Suitable for investing income earned in India
• Exchange-traded derivatives (F&O) are permitted, subject to applicable regulations and custodian requirements
• Investments are generally made on a non-repatriation basis
• Eligible funds may be repatriated subject to FEMA regulations and prescribed documentation

For NRIs seeking a straightforward and cost-effective investment setup, the Non-PIS route is often the preferred choice.

Difference Between PIS and Non-PIS Accounts

Investments That Generally Do Not Require PIS

A common misconception among NRIs is that all investments require a PIS account.

In reality, the PIS framework primarily applies to secondary market equity investments. Several other investment products can generally be accessed without a PIS account, including:

• Mutual Funds
• Initial Public Offerings (IPOs)
• Government Securities
• Bonds and Debentures
• Non-Convertible Debentures (NCDs)
• Exchange Traded Funds (ETFs), subject to applicable regulations

This makes investing in many Indian financial products much simpler for NRIs.

When Should You Choose PIS or Non-PIS?

Choose a PIS Account If:

• You want to repatriate your investment proceeds abroad
• You are investing using foreign earnings
• You prefer a dedicated structure for repatriable investments
• Your long-term financial plans involve moving funds back to your country of residence

Choose a Non-PIS Account If:

• You want a simpler and more cost-effective setup
• You are investing income earned in India
• You want access to the derivatives (F&O) segment
• You do not require unrestricted repatriation of investment proceeds

How the Transition Works for NRIs

Many individuals become NRIs after already having investments in India. In such situations, a common approach is:

• Convert your existing resident demat account into an NRI-compliant demat account linked to an NRO account.
• Continue holding existing investments through the NRO-based structure.
• Open a separate PIS-linked investment arrangement if you wish to make repatriable investments using overseas funds.

This allows NRIs to efficiently manage both repatriable and non-repatriable investments.

Demat Account Requirement

Whether you choose the PIS or Non-PIS route, an NRI-compliant Demat Account is generally required for holding securities in electronic form. The Demat Account works alongside the bank account and trading account to facilitate seamless investment transactions.

Steps to Open a PIS Account

• Submit the required documents to your bank
• Complete the prescribed NRI investment formalities
• Link the investment arrangement to your NRE account
• Open an NRI trading and demat account
• Start investing

Steps to Open a Non-PIS Account

• Submit the required documents to your bank
• Link the arrangement to your NRO account
• Open an NRI trading and demat account
• Register with a Custodian Participant where required for derivatives trading
• Start investing

Documents Typically Required

• PAN Card
• Passport
• Overseas Address Proof
• Bank Account Proof
• Recent Photographs
• Attestation by authorised entities, where applicable

Important Things to Keep in Mind

• NRIs trading in exchange-traded derivatives through an NRO account may be required to register with a Custodian Participant (CP).
• Under FEMA regulations, transfers from NRO accounts to NRE accounts are permitted up to USD 1 million per financial year, subject to applicable conditions and documentation requirements.
• Forms such as Form 15CA and Form 15CB may be required for certain remittances from India.
• Non-PIS transactions generally involve fewer reporting requirements, making them comparatively easier to manage.

Tax Considerations

Income and capital gains arising from investments made through either PIS or Non-PIS accounts are subject to applicable Indian tax laws. The tax treatment may vary depending on the nature of the investment, the holding period and the investor's country of residence.

NRIs should evaluate the tax implications of their investments and, where applicable, explore benefits available under Double Taxation Avoidance Agreements (DTAA) between India and their country of residence.

Conclusion

Both PIS and Non-PIS investment routes serve different purposes and there is no one-size-fits-all solution.

If ease of operation, lower costs and access to derivatives are your priorities, the Non-PIS route may be more suitable. If the ability to repatriate investment proceeds abroad is important, the PIS route remains a preferred choice.

In practice, many NRIs use both structures together to effectively manage repatriable and non-repatriable investments. Understanding the differences between the two can help you build an investment framework that aligns with your financial goals while remaining compliant with applicable regulations.

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Disclaimer - The information provided in this blog is intended solely for educational and informational purposes and should not be construed as investment advice, financial advice, tax advice, legal advice or a recommendation to buy, sell or hold any financial product or security. The regulatory, taxation, repatriation and investment-related information discussed herein is based on the laws, regulations and guidelines prevailing as on the date of publication and is subject to change without notice. Investments in securities and market-linked instruments are subject to market risks. Readers are advised to consult qualified financial, tax, legal and other professional advisors before making any investment decisions. Past performance and market trends are not indicative of future results.