Uncovering the Benefits of Opening a PIS Account for NRIs

Non-resident Indians (NRIs) have always had a difficult time managing their finances. The process is even more complicated if they want to invest in India. Thankfully, the new PIS account has made it much easier for NRIs to invest in India. The PIS account is a special type of account that allows NRIs to invest in Indian companies. There are a few key benefits of using a PIS account:

  1. You can invest in Indian companies with ease.
  2. You can repatriate your profits back to your home country.
  3. You can use the account to import goods and services from India.
  4. You can use the account to pay for expenses in India.
  5. The account is exempt from Foreign Exchange Management Act (FEMA) restrictions.
  6. You can use the account to pay taxes in India.

What is a Portfolio Investment Scheme (PIS) Account?

A Portfolio Investment Scheme (PIS) Account is an investment account that allows Indian nationals living abroad to invest in Indian companies. The account can be opened with a foreign bank or an Indian bank. There are several benefits to opening a PIS account. 

  1. Allows NRIs to legally invest in Indian companies.
  2. Offers a tax-efficient way to invest in India. 
  3. Provides investors with greater control over their investments.

Features and Benefits of PIS Accounts

NRIs have specific needs concerning their investments, and a PIS account can be an ideal vehicle to address those needs. Let’s take a look at some of the key features and benefits of PIS accounts:

  • PIS accounts offer high liquidity, with funds available within 24 hours of notice.
  • PIS accounts offer competitive interest rates, often higher than those available on other investment products.
  • PIS accounts are not subject to Indian income tax or wealth tax, making them a very tax-efficient investment option.
  • PIS accounts offer complete confidentiality, with no disclosure of account or holder information to the Indian authorities.
  • PIS accounts can be opened with as little as Rs. 100,000 (about $1,500), making them accessible to investors of all sizes.

Eligibility and Documents Required

NRIs can open a PIS account if they are either citizen of India or have resided in India for a minimum period of 182 days in the year preceding the account opening date.

The documents required to open a PIS account are:

  • Proof of identity (passport, voter ID, driving license)
  • Proof of residence (ration card, utility bill, bank statement)
  • Income proof (salary slip, Form 16)

Advantages of Having a PIS Account for NRIs

Having a PIS Account for NRIs offers numerous advantages which are essential to be taken into account:

  • NRIs can remain updated with Indian markets through this account as they can trade in various products such as equity, derivatives, currency, and much more.
  • PIS Account facilitates the purchase and sale of securities in Indian markets thus providing NRIs with an opportunity to invest in their home country.
  • NRIs can avail convenient funds transfer facility through a PIS account enabling them to transfer funds from their NRE/NRO accounts to the designated PIS Bank accounts within no time. 
  • Facilitates hedging or protection from losses or volatility in the stock market by allowing NRIs to place orders for both buy and sell transactions at the same time.

Different Types of PIS Accounts

There are several types of PIS accounts available to NRIs, with different features and benefits depending on their investment objectives. Depending on the type of account chosen, NRIs may be able to invest in various types of government securities such as treasury bills, government bonds, and shares of equities listed on Indian exchanges.

  • The most common type of PIS account is a demat account, which allows investors to purchase securities online without having to worry about the paperwork associated with paper certificates. For those looking to take advantage of the tax benefits offered by PIS accounts, an NRE (Non-Resident External) account can be opened for investments in stocks and mutual funds. And for those looking for higher returns from derivative markets, an NRI Futures & Options Account can be opened, allowing traders to buy and sell futures and options contracts on Indian exchanges.

Indian PAN Card

Applying for a PIS account as an NRI requires a valid Indian PAN Card. The PAN Card is a unique 10-digit alphanumeric number issued by the Indian government to citizens and foreigners who are liable to pay taxes in India. This document serves as proof of identity and is necessary for filing tax returns, making financial transactions, and other purposes such as opening a bank account or getting a mobile phone connection in India. In case an NRI does not have an Indian PAN Card, they could obtain one by applying for it on the income tax department’s website.

How to Activate your PIS Account

Activating your PIS account is relatively straightforward:

  • Open a Trading and Demat Account with a Semi-approved broker and then apply to the intermediary. The intermediary will then forward the application to RBI for approval and, upon successful completion of the KYC process, you will receive your PIS account details. 
  • After receiving account details, you can begin trading in the Indian stock market. It’s important to remember that you must provide all relevant documents, such as a copy of your address proof and PAN card when submitting your application. Furthermore, they will recommend keeping updated records of any transactions you make with your PIS account.

How to Operate the PIS Account?

The NRI will have access to the bank’s web portal when the PIS account has been approved. On this platform, the NRI may monitor their funds and carry out financial transactions. The NRI can send money abroad, even from India to other nations. To achieve this, the NRI must give information on the recipient countries, currency rate, and remittance intent. It is also feasible for NRIs to register a joint account with an Indian resident. The NRI may easily manage its funds with a PIS account attributable to its simple operations.

Restrictions for PIS

It is important to note that NRIs are subject to certain restrictions when opening and maintaining a PIS account. 

  • Funds invested in equity markets must be held in a Demat Account and can only be transferred to a bank account in India, or from an existing Indian Equity Demat Account.
  • NRIs are not allowed to subscribe to initial public offerings (IPOs), take part in futures and options market trading, or invest more than 10% of their total balance in a single stock.

Despite these restrictions, the benefits of opening a PIS account for NRIs far outweigh the risks. With increased flexibility, access to better returns, and the ability to make quick decisions on the stock market, it is no wonder that so many NRIs have chosen this option over traditional investments.

NRI investors can enjoy several benefits by opening a PIS account. These benefits include:

  • The ability to invest in some asset classes, including mutual funds, bonds, and equities
  • Flexible investment options, including the ability to choose your investment adviser and investment plan
  • The ability to repatriate funds and capital gains tax-free

Opening a PIS account is a great way for NRI investors to save for their future and diversify their investment portfolio.