Portfolio Investment Scheme (PIS) is a scheme of the Reserve Bank of India (RBI) defined in Schedule 3 of Foreign Exchange Management Act 2000 under which the ''Non Resident Indians (NRIs)'' and ''Person of Indian Origin (PIOs)'' can purchase and sell shares and convertible debentures of Indian Companies on a recognized stock exchange in India by routing all such purchase/sale transactions through their account held with a Designated Bank Branch.

For all the Indian companies or companies listed on Indian stock exchanges, there are certain limits which have to be monitored under FEMA regulations. For any company the foreign investment into that company cannot cross certain limit. This limit is different from company to company and sector to sector. Also individually any NRI or a PIO cannot invest more than 5% in any Indian company.

NRI/PIO can open only one PIS account with any of the designated banks in a prescribed format for PIS account, upon which the bank can issue a PIS approval letter to the investor. If the investor wants to shift banking relationship to other bank, then they have to obtain No objection certificate from your existing banker to cancel the PIS approval with them.

Any investment done in secondary market should be routed through a PIS account. For other products the investment can be done through direct subscription route. Mutual funds are to be traded through Non PIS accounts.

• Sale of shares, which were, acquired other than PIS.
• Shares acquired through IPO’s
• Gifts from relatives or otherwise
• Shares bought as resident Indian
• Fresh acquisition through IPO’s.
• Investment in Mutual Funds

Investment can be made on repatriation as well as non-repatriation basis. However, an NRI will have to open NRE account as well as NRO account with designated bank branch as the sale proceeds of non-repatriation investment can only be credited to NRO account.

NRE stands for Non Repatriable External account and NRO stands for Non Repatriable Ordinary account.

Difference between the two is that, funds can be converted into foreign currency from NRE account only. This implies that the funds can be repatriated out of India through NRE account. However, for certain purposes like education, medical treatment etc. RBI allows repatriation from NRO account also subject to limit for individual causes.

Yes. An NRI can purchase up to a maximum of 5% of the aggregate paid up capital of the company (equity as well as preference capital) or the aggregate paid up value of each series of convertible debentures as the case may be. For the purpose of this ceiling, investment under the Portfolio Investment Scheme on repatriation as well as non-repatriation basis will be clubbed together.

Yes, there are charges associated with the PIS account like Annual Maintenance charge, transaction charge etc. Similarly the depository participant and authorized broker will also charge for the trades as per their fees schedule. Please contact a designated bank, DP and the broker for the Schedule of charges.

The repatriation of the sale proceeds, net of taxes, are allowed if the original purchase was made on repatriation basis and such investments were made out of funds from NRE/FCNR account or by means of remittance from abroad. Corporate benefits may be in the form of dividend, interest, rights, bonus, etc. Any corporate benefit resulting out of investment in securities on non-repatriation basis will not carry the right of repatriation.

As per recent RBI guidelines, NRI should have a separate bank account exclusively for PIS purposes. Transactions relating to their personal banking as well as on account of transactions relating to shares acquired other then under PIS including IPOs should be routed in a separate bank account not linked to PIS. Account/s can be jointly held.

The shares/convertible debentures acquired under IPO need not be routed through Designated Bank as this does not come under PIS. Such transactions, if routed through designated bank, should be done in a separate bank account not linked to PIS. These come under the purview of Non-PIS.

RBI notifies a list of companies where the ceiling limit has reached and where no fresh purchases can be made. This list is called ban list.

RBI also notifies a list called caution list notifying the names of companies whose NRI holdings has reached 2% below the ceiling limit. Any further purchases are allowed only by obtaining prior approval from RBI. The RBI on first come first serve basis issues such approvals. Customers ban/ caution list can be obtained from the PIS branch.

The sales proceeds are subject to Capital Gains tax. The rate of tax depends upon the period of holding. Currently the rate for short-term capital gains tax is 10.3% and for long-term capital gains is NIL. The Designated Bank will deduct such tax at source.

The orders need not be placed through the Designated Bank. However, the reporting of the transaction shall be done to the Designated Bank on the same day of transaction along with original contract note. However, the payment and receipt of funds in settlement of such trade has to be routed through the Designated Bank account.

No. NRI cannot sell without taking delivery of the shares/convertible debentures purchased. Short selling is not permitted under PIS.

NRI will have to off load such portion of the holding, which is in excess of the prescribed limit.

If the client has issued ‘Letter of authority’ favoring the broker for PIS transactions, bank debits client account and credits broker in case of purchases and credits client account with subsequent debit to broker account incase of sell transactions.

NRIs can trade in Future & Options on non-repatriable basis through NRO account. This is not under purview of PIS.