Investment & Financial Planning

PIS vs. Non-PIS: The Best Stock Investment Options for NRIs in India

Shubham Jain
Written by Shubham Jain
Updated on: April 2, 202614 mins Editorial Standards
PIS vs. Non-PIS

For NRIs, the Portfolio Investment Scheme (PIS) and Non-PIS are the two popular accounts for investing in the Indian Stock market. These bank accounts help you to purchase and sell bonds, stocks, mutual funds, and other securities. However, among the two options, NRIs are always confused about which is better.

To clear up any confusion, this blog compares PIS and Non-PIS accounts. Read on and select the account that perfectly matches your investment needs.

Key Takeaways
  • PIS and Non-PIS are two types of accounts that help NRIs to invest in the Indian stock market.
  • The RBI regulates PIS accounts, and transactions should be conducted in accordance with its guidelines.
  • Non-PIS accounts do not require RBI approval to invest in India. 
  • The tax implications of PIS and Non-PIS accounts are the same.
  • You need an NRE or NRO account to have a PIS and a Non-PIS account. 

What is a PIS (Portfolio Investment Scheme) Account?

A Portfolio Investment Scheme (PIS) account is a facility regulated by the Reserve Bank of India (RBI) that helps NRIs invest directly in the Indian stock markets. It is a regulated, structured way for Indians living overseas to participate in Indian debt and equity markets.

You can open this account with your NRE or NRO accounts. Let's take a quick overview of this account. 

  • Without a PIS account, NRIs cannot make a direct investment in the Indian stock market. It is vital to have this account to process all the investment deals.
  • RBI supervised the PIS account of NRIs investing in Indian stocks and shares.
  • In case of repatriation, in accordance with RBI regulations, money, including earnings, is sent back abroad.
  • Through listed stocks, NRIs can participate in primary and secondary markets.
  • For fund transfer, NRIS need to connect their PIS account to either NRO or NRE account. 

This was all about the PIS or Portfolio Investment Scheme account. Moving ahead, let's know about the Non-PIS account. 

What is a Non-PIS Account?

A Non-PIS account, on the other hand, offers NRIs more flexible options for investing in the Indian stock market. Additionally, unlike a PIS account, you do not need to report RBI for your transactions in this account. This makes the Non-PIS account more adaptable and less restrictive for a wide range of financial options. 

Considering its flexibility and simplicity, this account attracts several NRIs for investment in India. Also, if you want to invest outside publicly traded equities, this account offers several options. Further, let's take a quick overview of this account.

  • Non-PIS accounts do not allow stock exchange trading. However, you can invest in unlisted stocks, mutual funds, or debt units.
  • You can use this account for unlisted stocks or long-term non-public investments in India.
  • Usually, remittances are not effectively available in Non-PIS accounts.
  • Unlike in PIS, in Non-PIS accounts, RBI does not keep a record of the transactions made by the NRIs in the investment market. 

So, this is what a Non-PIS account is. Moving on, let's look at the key differences between PIS and Non-PIS accounts. 

PIS vs. Non-PIS Account: Key Differences

Here, the table below summarizes the difference between a PIS and a Non-PIS account:

Basis

PIS

Non-PIS

Savings Account

NRE Savings account

NRO Savings account

Purpose

Help NRIs on a repatriation basis in the purchase and sale of equity shares, IPOs, and convertible debentures. It is a suitable choice for short-term investments and active trading. 

This account helps NRIs to purchase and sell mutual funds and financial securities on a non-repatriation basis. Right choice for long-term strategic holdings. 

PIS Permission Letter

NRIs need to get a PIS permission letter from the RBI through their partner bank.

A Non-PIS account does not require a PIS permission letter. 

Instruments

This account is especially designed for share trading on Indian stock exchanges. 

Through this account, NRIs can invest in equity futures & options, shares, commodities, mutual funds, and currency.

Repatriability

These are repatriable. 

These accounts are not repatriable. 

Fund Transfer

For investment, it is vital to transfer funds to the PIS account. After this, they will be available on your trading account. Considering this, the whole process takes one day. 

Using net banking, you can transfer your funds directly from your NRO account to a trading account.

Investment Restriction

The maximum NRI or foreign shareholding in a company by the RBI is applicable. 

There are no such investment restrictions in this account. 

Mutual Fund Investment

Under a PIS account, you cannot invest in mutual funds.

In the Non-PIS account, you can invest in mutual funds.

Cost 

Charges you need to pay the bank include:

  • Per contact note Rs 300. It is per day of trading.
  • Additionally, you also need to pay the Annual Maintenance Charge (AMC) of a maximum of Rs 1500 per year. 

Rs 100 or 0.10% to 1% whichever is less. Also, the prices may vary from broker to broker.

Shares Bought with Resident Status

You must liquidate the shares that you bought as an Indian resident. Additionally, you need to open a new demat account to buy shares on a non-repatriation basis. 

You can transfer the shares you bought as a resident Indian through your Non-PIS account. 

This was all about PIS vs. Non-PIS accounts and how they are different from each other. Moving ahead, let's know about the tax implications for these accounts. 

PIS vs. Non-PIS Account

What Are the Tax Implications for PIS and Non-PIS Accounts?

For both accounts, PIS and Non-PIS, for NRIs investing in India, the tax implications are the same:

  • Capital Gain Tax on Investment-Oriented Investment
    • If sold within 12 months of purchase, short-term capital gain is taxed at 20% plus applicable surcharge and cess.
    • If sold after 1 year, a long-term capital gain is subject to a 12.5% tax plus the applicable surcharge. Additionally, cess is charged on capital gains exceeding INR 1,25,000 in a financial year.
  • Capital Gains Tax on Debt-Oriented Investment
    • If sold within 36 months, a short-term capital gain tax is charged at the income tax slab rate for NRIs.
    • If the investment is sold after 36 months, long-term capital gain is taxed:
      • 20% with indexation benefits.
      • 12.5% without indexation benefits. It is an alternative. 

These are the tax implications for PIS and Non-PIS accounts. Moving further, let's know how to open a PIS account. 

How to Open a PIS Account?

Follow the steps below to open a PIS account:

  • Step 1: Choose an authorized Indian bank account that offers PIS services for NRIs. 
  • Step 2: Submit the required documents, such as proof of your NRI status, passport, PAN card, overseas address proof, and visa.
  • Step 3: Link your PIS account to your NRE or NRO account. It further helps you with fund transfer.
  • Step 4: Open a trading account with a registered broker in India. 
  • Step 5: Once your bank and broker have completed document verification under the RBI PIS system, your account will be registered. 

This is how you can simply open a PIS account in India. Moving ahead, let's know how to use a Non-PIS account. 

How to Use a Non-PIS Account

How to Use a Non-PIS Account?

The process to open a Non-PIS account is simpler than the PIS account. Here is how you can open a Non-PIS account in India:

  • To open a Non-PIS account, first you need to open an NRO or NRE account. 
  • Submit the investment application to your bank or broker.
  • As per the requirements of your investment, make payments using your NRO or NRE accounts.
  • Follow the rules and regulations stated under FEMA (Foreign Exchange Management Act) for Non-PIS accounts.

This is how you can use your Non-PIS account in India. Now, let's move on to the key things NRIs need to consider when investing in Indian stocks. 

Key Considerations NRIs Need to Consider While Investing in Indian Stocks

NRIs should consider the following things while selecting between the PIS and Non-PIS accounts:

Basis

PIS Accounts

Non-PIS Accounts

Investment Purpose

For actively trading in listed equities, it is mandatory to have a PIS account.

This account is a good option for long-term investments in private placements or unlisted companies.

Repatriation Needs

Under RBI guidelines, it allows easy repatriation and principal overseas. 

Depending on the type of investment, repatriation is limited. 

Regulatory Compliance

Needs strict compliance and reporting to RBI. 

Provides flexibility with fewer regulatory requirements. 

Invest Horizon

Right option for short to medium term trading in listed equities. 

Ideal selection for holding in unlisted shares or private investments on a long-term basis. 

These are the key considerations NRIs should consider when opting for stock investments in India. 

Final Thoughts

Lastly, when choosing between a PIS account and a Non-PIS account, NRIs need to consider their financial and investment goals. A PIS account is a good option if you want to invest your foreign income in India. On the other side, Non-PIS accounts are a good choice for investing your Indian earned income in India. 

So, it totally depends on your investment choice which account you choose. Further, if you are still confused and want to know more about these accounts, connect with Savetaxs. We have a team of experts who will assist you with all your queries related to these accounts and help you choose the one that best matches your financial needs. 

Note: This guide is for information purposes only. The views expressed in this guide are personal and do not constitute the views of Savetaxs. Savetaxs or the author will not be responsible for any direct or indirect loss incurred by the reader for taking any decision based on the information or the contents. It is advisable to consult either a CA, CS, CPA or a professional tax expert from the Savetaxs team, as they are familiar with the current regulations and help you make accurate decisions and maintain accuracy throughout the whole process.

About Author
Shubham Jain
Shubham Jain Founder & NRI Tax Advisor

Shubham Jain is the Founder of SaveTaxs and has extensive experience in Indian and NRI taxation. He advises individuals, NRIs, and businesses on tax filing, tax planning, capital gains, DTAA benefits, fund repatriation, and compliance matters. He regularly writes about taxation and related financial topics. His focus is on making complex tax concepts easy to understand. Through his articles, he helps taxpayers stay informed, avoid common mistakes, and stay compliant with Indian tax laws. See Full Bio

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Frequently Asked Questions

PIS accounts are stock market trading accounts that require permission from the Reserve Bank of India (RBI) to repatriate funds without any limitations. Non-PIS accounts offer broader investment options, such as mutual funds and unlisted shares, and do not require RBI permission.

Yes, NRIs can use NRE and NRO accounts for both PIS and Non-PIS investments; however, they must follow specific rules. Depending on the repatriable basis, PIS investments can be linked to an NRE account (repatriable basis) or to an NRO account (non-repatriable basis) for each type. In contrast, Non-PIS investments can be opened in either account without any specific condition.

It totally depends on your financial goals. A PIS account is an ideal option for investing your foreign earnings in India. However, it comes with certain limitations such as lower flexibility, higher fees, and restricted transactions. On the other hand, a Non-PIS account is a good option if you want to invest your Indian income.

Yes, the returns from PIS and Non-PIS investments are taxable in India. The tax rules depend on the type of investment and your resident status. The tax on short-term capital gains from PIS investments is 15%, and on long-term capital gains, it is 10% on amounts exceeding INR 1,00,000.

To open a PIS or Non-PIS account, an NRI first needs to open an NRE or NRO account with a designated bank that offers these services. To open a PIS account, you need to obtain permission from the RBI and then open a separate PIS bank account. Further, to open a Non-PIS account, you need to open a trading and demat account, link it to your NRO account, and ensure compliance with FEMA regulations.