PIS (Portfolio Investment Scheme)

PIS (Portfolio Investment Scheme) is a regulatory framework administered by the Reserve Bank of India under the Foreign Exchange Management Act, 1999 (FEMA), that permits Non-Resident Indians (NRIs) and Overseas Citizens of India (OCIs) to purchase and sell shares and convertible debentures of Indian companies on a recognised stock exchange on both a repatriation and non-repatriation basis.

Definition

Under RBI's Master Direction on Investment by Non-Resident Indians / Overseas Citizens of India in Indian securities (updated periodically), an NRI who wishes to trade equities on NSE or BSE must designate a single bank account — either an NRE savings account (for repatriation-basis trades) or an NRO savings account (for non-repatriation-basis trades) — at an Authorised Dealer (AD) bank approved by RBI for PIS. All equity purchase and sale proceeds, dividends, and related credits must flow through this designated PIS account. The AD bank reports each transaction to RBI to enable aggregate NRI holding monitoring.

PIS applies only to secondary-market equity trading. Mutual fund investments by NRIs are governed separately by FEMA (Non-debt Instruments) Rules, 2019, and do not require a PIS permission — they flow through NRE or NRO bank accounts directly. Intraday equity trading, futures and options, and commodity derivatives are outside PIS scope.

Why it matters for investors

PIS is the legal gateway for NRIs who want to hold Indian blue-chip equities directly (e.g., Reliance, HDFC Bank, Infosys) in their own demat account rather than through a fund vehicle. Without PIS registration, any such secondary-market purchase would violate FEMA and could attract penalty. The scheme also enforces aggregate caps: FII/FPI + NRI combined holdings cannot exceed the sectoral FDI limit or a company-specific cap (typically 24% of paid-up capital for the NRI sub-limit, extendable to sectoral cap by shareholder resolution). When aggregate NRI holding in a stock approaches these caps, RBI issues an alert and further purchases are restricted.

NRIs remitting capital gains from PIS sales back abroad (repatriation basis via NRE PIS account) need a CA certificate in Form 15CA/15CB for transactions above the prescribed threshold, confirming applicable DTAA relief or TDS has been deducted. This compliance layer means PIS trading has higher administrative friction than domestic resident trading.

Worked example

Scenario: Ramesh, an NRI in Singapore, wants to buy 500 shares of HDFC Bank on NSE. He holds an NRE PIS account at HDFC Bank India, linked to his demat account at a SEBI-registered broker.

Transaction flow:

• Step 1 — Ramesh places a buy order for 500 HDFC Bank shares at ₹1,640 each = ₹8,20,000 total outlay.
• Step 2 — Funds are debited from his NRE PIS account before settlement (T+1).
• Step 3 — HDFC Bank India (as AD) reports the purchase to RBI's e-Kuber portal, aggregating against HDFC Bank Ltd's NRI sub-cap.
• Step 4 — Shares are credited to Ramesh's demat account on T+1.
• Step 5 — On sale, proceeds (net of TDS on capital gains at applicable rate) are credited back to the NRE PIS account and are fully repatriable.

TDS note: For NRI sellers, the broker deducts TDS at 15% + surcharge + cess on LTCG (>12 months) and 15% on STCG under Section 111A, unless a lower rate applies under the India-Singapore DTAA.

Note: This example uses illustrative figures. Tax rates cited are as per current Finance Act provisions. Past performance is not indicative of future returns.

See also

• LRS (Liberalised Remittance Scheme) — for resident individuals remitting abroad; PIS is the inbound NRI equivalent for equity investment
• DTAA — bilateral treaties that may reduce TDS rates on capital gains for NRI sellers
• FATCA — US-person disclosure obligation that applies in parallel with PIS for US-resident NRIs
• NRI Investing in India — Complete Guide
• HDFC Bank — live NRI PIS-eligible stock with current holding data

Primary source

RBI Master Direction — Investment by Non-Resident Indians (NRI) and Overseas Citizens of India (OCI) in India: rbi.org.in — NRI/OCI Investment Master Direction. FEMA (Non-Debt Instruments) Rules, 2019 (Ministry of Finance): dea.gov.in — FEMA NDI Rules 2019.

Past performance is not indicative of future returns. Mutual fund investments are subject to market risks. Read all scheme-related documents carefully. ARN-314872. Content is informational and not investment advice.