Tuesday, December 26, 2017

NRI should use Portfolio Investment Scheme (PIS) to buy shares

If you know, NRIs are allowed to invest in Stock Market in India i.e. they can purchase and sell shares in Stock Exchanges (Secondary Market) as well as they can buy stocks on Initial Public Offering (IPO), the Primary Market. Unfortunately, not many NRI knows about Portfolio Investment Scheme or PIS. It's a scheme of RBI under Schedule 3 of Foreign Exchange Management Act 2000 which allows NRIs to purchase and sell shares and convertible debentures of Indian companies on a recognized stock exchange routing such purchase/sale transaction through the account with the designated bank branch e.g. ICICI bank.

This also means you need to open separate NRE and/or NRO account with the bank for buying and selling shares in NSE or BSE. In this article, you will learn some important things about PIS account, which is essential for opening and operating your PIS account. This is like the DEMAT account of NRI.

Important points about Portfolio Investment Scheme (PIS)

1) You can make an investment on repatriation or non-repatriation basis. If you want to make investment both ways then you should open both NRE and NRO account with designated bank. The sale proceeds of non-repatriable investment should be a collection on NRO account only and investment for non-repatriation basis can only be made from NRO account.

2) You can repatriate funds acquired through buying selling shares only if the original source used to purchase the shares was from NRE or FCNR account or by means of remittance from abroad. If the original purchase was made from NRO account then the sale proceeds are not repatriable.

3) NRI should maintain a separate bank account exclusively for PIS purpose. Transaction related to their personal banking as well as an account of transaction related to shares acquired other than under PIS scheme including IPOs should be routed in a separate bank account not linked to PIS.

4) NRIs can only appoint one designated bank for the purpose or routing transactions under PIS scheme.

5) It is mandatory for an NRI to route all secondary market transactions through his PIS designated account i.e For all purchase / sell of stocks in secondary market only the PIS designated account should be debited / credited.

6) NRI can purchase up to a maximum of five percent of the paid-up capital of a company and maximum of five percent of paid-up value of each series of debentures.

Here are some more important details of Portfolio Investment Scheme:

NRI should use Portfolio Investment Scheme (PIS) to buy shares

That's all about Portfolio Investment Scheme or PIS account. You can open PIS account with ICICI, HDFC, Axis or Kotak Mahindra bank in India.

1 comment:

  1. Does the profit generated from PIS by an NRE qualify as local income for the purpose of income tax?