Permitted Transactions

• Equity Share and Convertible Debentures purchased from secondary market.
• Shares acquired by split

Excluded Transactions

• IPO
• Bonus
• Rights
• ESOPs
• Shares acquired on conversion of ADRs/GDRs
• Shares acquired under Direct Investment Schemes
• Shares purchased outside India from other NRI/OCB
• Mutual Funds
• Insurance investments

Permissible Credits

• Inward remittance in foreign exchange through normal banking channels
• Transfer from applicant's other NRE accounts or  FCNR(B) accounts or NRO accounts maintained with banks in India
• Net sale proceeds (after payment of applicable taxes) of shares and convertible debentures which were acquired on repatriation basis(for NRI PIS) and non repatriation basis(for NRO PIS) and sold on stock exchanges through registered brokers.
• Dividend or income earned on investments under PIS.

Permissible Debits

• Outward remittances of dividend or income earned.
• Amount paid on account of purchase of shares and convertible debentures on repatriation basis or non repatriation basis on stock exchanges through registered broker under PIS.
• Any charges on account of sale/purchase of shares or convertible debentures under PIS.

What is Portfolio Investment Scheme (PIS) to NRIs?

RBI has allowed NRIs to invest in shares/ convertible debentures of listed Indian companies in recognized stock exchanges under Portfolio Investment Scheme ( PIS) through Authorised Dealer Category I banks.

Can NRIs invest both on repatriation and non-repatriation basis and how?

Investments can be made on repatriation or non-repatriation basis. For investments under repatriation basis, a separate NRE SB PIS account is opened by remittance from overseas/NRE/FCNR account. If the investments are on non-repatriation basis, NRO SB account is to be opened by remittance from overseas/NRE/FCNR /Local sources.

In case the NRI is already having NRE/NRO account, is it necessary to open another NRE / NRO account for PIS?

Existing NRO SB can be used for non repatriable investments but separate NRE SB PIS for repatriable investments have to be opened exclusively for the PIS transactions. No cheque books are issued in the account. Separate request for withdrawal/transfer/closure of the account is to be given.

What are the formalities for opening PIS account for investments?

NRIs have to open NRE SB PIS for repatriable and NRO SB for non repatriable investments. A Trading Account with a recognized broker has to be opened and DP account with the bank or broker shall be opened. Separate DP accounts have to be opened for repatriable and non repatriable investments.

Is it permitted for an NRI to have more than one bank as a designated bank for his PIS transactions?

No. NRIs have to deal with one bank only for PIS

Can NRIs do day trading?

No. NRIs have to take delivery of the shares and give delivery of the shares. No short selling is allowed.

Can NRIs undertake futures/options traded in Exchanges?

Yes. NRIs can execute futures/options etc. which are traded in the Stock Exchanges on non-repatriation basis (through NRO SB PIS A/c.) only subject to SEBI approved limits.

Is there any limit for investments?

Investments on repatriation /non repatriation shall be up to 5 % of the paid up capital of the company for a single NRI. Aggregate Investments by all NRIs cannot exceed 10 % of the paid up capital of the company. The aggregate Investments can be up to 24 % if the general body of the Indian company passes a special resolution to that effect. This limit is monitored by RBI on a daily basis and advises Banks if the limit is reached so that further investments shall not be allowed.

When a resident Indian becomes a non-resident, is it required to change the status of holding from Resident to Non-Resident?

As per section 6(5) of FEMA, NRI can continue to hold the securities which he/she had purchased as a resident Indian, even after he/she has become a non-resident Indian, on a non-repatriable basis

When a non-resident Indian becomes a resident in India, is it required changing the status of holding from Non-Resident to Resident?

Yes. NRI has to inform the change of status to the designated authorised dealer branch, through which the investor had made the investments in Portfolio Investment Scheme and 

The DP with whom he/she has opened the demat account. Subsequently, a new demat account in the resident status will have to be opened, securities should be transferred from the NRI demat account to resident account and then close the NRI demat account.

Does the NRI require permission to purchase securities by subscribing to public issue?

NRI/NRO can purchase shares under IPO if the issuing company is issuing shares to NRI on the basis of specific or general permission from GoI/RBI. Therefore, individual NRI need not obtain any permission.

If the NRI acquire shares in Primary market both on repatriation and non-repatriation basis, should the sale proceeds of such holdings have to be routed through PIS account with the Designated Bank?

No. The shares/convertible debentures purchased in Primary Market under IPO need not be routed through the Designated Bank Branch since this does not come under PIS.

What is the current arrangement Federal Bank has with broking firms?

Federal Bank has tied up with reputed broking firms for offering PIS to NRIs. Brokers have presence in GCC. NRIs can place orders with Brokers which will be executed by them. Payments for Purchase and receipts for sales will be undertaken by Federal Bank. The DP account will be operated by bank /Broker under Power of Attorney issued by NRI. As such, NRIs need to place orders only which will be executed by the Broker and all other procedures are undertaken by the Bank.

What are the tax implications of investments now?

If sold within one year of purchase, short term capital gains will be deducted from the sale proceeds and LTCG will be deducted on sale of shares held more than one year. TDS certificate will be issued by the bank to the NRI for the tax deducted.