1. How can NRI's invest in the Indian stock market?

First, NRIs need to open a bank account and decide whether they need to invest on a repatriable or non-repatriable basis. NRIs already having bank accounts should check with their bankers to find out whether such accounts have mandate for stock trading as you can nominate only one bank account for your stock trading (PIS). Some of the leading private sector banks are competent in this regard and can help you open an online account.

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. Any NRI or a PIO wanting to trade/make fresh investments in the Indian Equity Secondary Market needs and must have one PIS account with only one designated bank in India.

NRE PIS account

NRO PIS account

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 that 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 designated banks (Preferred bank – Axis Bank) in a prescribed format for PIS account, upon which the bank will issue a PIS approval letter to the investor.

No, only investment done in secondary market should be routed through a PIS account. For other products the investment can be done through direct subscription route.

It is a normal savings bank account which can be opened with any bank in India. Non-PIS is an account for which the transactions are not reported to RBI. This account takes care of selling all those shares which are not allowed under PIS. Shares acquired under IPO or received as gift or bought as resident Indian can be sold under Non-PIS account.


>PIS account is applicable only for NRIs and not for resident Indians.

>It is only for trading in Indian markets and not any other foreign markets.

>It is applicable only for equity trades and not Mutual Fund investments.

When investor brings the money to India and does not want to take it back to the home country, he can make the investments using NRO account. Such investments are said to be done on non-repatriable basis. In case, he decides to take the principal plus the profits back to the home country, then he would essentially need an NRE account. In NRE accounts, he would be allowed to take out the principal and the profits, after paying necessary taxes. This is called repatriable investment.

Features of NRE and NRO account
Account Type Currency
Account TypePurpose Of Account
NRENRE Accounts are used to hold overseas savings remitted to India after converting to INR
NRONRO Accounts are used to hold Indian income like rent, dividend etc.
Account TypeRepatriation
NRE Fully repatriable
NROOnly interest on NRO account balance (after deducting TDS)
Account TypeType of Account
NRESavings Bank Account Fixed Deposit Account
NROSavings Bank Account Fixed Deposit Account
Account TypeTax on Interest
NREFully exempt
Account TypeLocal rupee funds
NRECannot be deposited
NROCan be deposited
Account TypeAdvantages
NRERupee account with full repatriation
NROAccount for local Deposits
Account TypeJoint Holding Facility
NREOnly with NRIs
NROBoth with Resident/Non-Resident
DescriptionShort term
Equity (Direct) & Equity Oriented Mutual FundsTax Rate 15%
Debt Funds30%
DescriptionLong term
Equity (Direct) & Equity Oriented Mutual FundsNIL
Debt Funds10% without indexation benefit Or 20% with indexation benefit whichever is lower.

>Dividend is totally tax free in the hands of investors.

>Dividend distribution

Tax Deducted at Source (TDS)
DescriptionShort Term Capital Gains
DescriptionLong Term Capital Gains
Debt20% after providing for indexation
DescriptionTDS on Interest earned
Debt,EquityIn case of NRE account – No TDS Incase of NRO account – 30% TDS

> Units or securities held for more than 12 months qualify for long term.

>No set-off is available against losses while deducting TDS on short term capital gains.

>TDS will be deducted by banker or Mutual funds and can be claimed by investor while filing Income Tax returns, if total tax liability is lower.

> TDS certificate will be issued which can be used to claim refund.

You will have to ask your bank for Portfolio Investment Scheme (PIS) approval. The bank may charge you a nominal fee of around Rs 1000 to Rs 2000 and you would be allowed to invest in the markets. Another important guideline is that NRIs cannot undertake speculative trades in cash segment. For instance, if they buy shares on Monday they will have to wait until Wednesday to sell it. However, they would be allowed to trade in the futures segment of the market. These are the general guidelines prescribed by RBI for NRI investing. RBI has relaxed its rules and it is upto your bank to verify your documents and the contract notes. Banks would definitely charge you a fee for these services and hence shop around and look for the bank where you can get the best deal.

Yes, NRIs can do so by giving Power of Attorney (POA). Currently, many NRIs are doing this as it is a lot easier and faster.

NRI customers are authorized only to take delivery of shares. They cannot do intraday trading owing to restrictions imposed by RBI/SEBI. In the case of Privileged NRI Account; you can trade in Derivatives, subject to approval from relevant authorities.

>PIS account .

>Passport Copy (Photocopy).

> Visa Copy (The visa could be either in the passport or given separately).

> Cheque leaves and Bank Statement compulsory/Banker’s verification.

>Signature Verification.

>PAN card (Mandatory).

> Proof of local and foreign address.

>Passport copy for proof of address.

>Visa Copy (In case the place of issue of passport is India).

>PIS Permission /RBI Approval.

> Demat Proof.

>Stamp Paper to be signed by the client.

>Photograph signed across

>POA (Power of attorney) – if required by the client & notarized from abroad.

>Authority Letter – (If authority given by the client).

>Photo of person authorized.

> Letter signed by authorized person.

>PAN card. (Mandatory).

>Details of NRE / NRO account opened with banks and Banker Verification.

>Purchase Details of Stock Holding, if any.

> Letter from current employer (if applicable).

>Open a NRE/NRO Bank Account with designated bank.

> Apply for PIS Approval.

>Open Demat Account.

>Open Broking Account.

Yes. PAN card is mandatory for investments in equity shares and mutual funds.

TDS is computed on the profit amount or the gain as per the applicable rate i.e. short term or long term on a First-In, First-Out (FIFO) basis.

For any TDS to be deducted and money to be remitted to bank account, there are three things which have to be verified

>Amount of gain = Selling price – Purchase price .

>Duration of holding i.e. long term or short term = Selling date – Purchase date

>Source of fund for purchase i.e. NRE or NRO .

Important: TDS is deducted only at the time of crediting sales proceeds.

Portfolio Management Services (PMS) provides the benefits of diversification across assets, sectors, and funds. The experts in Portfolio Management achieve better result through structured and disciplined approach. Further, investor gets access to their portfolio on web and can track their asset allocation. They can also get complete details of stocks, sectors and funds. At the end of each year, they get audited report that includes holding with valuation, realized and accrued profit and losses, listing of dividend received during the year and transaction statement. NRIs can avail this service. Using PMS, it becomes easier for NRIs to manage the records and filling of income tax returns.

Income Tax Rates/SlabsUpto 1,80,000 Upto 1,90,000 (for women) Upto 2,50,000 (senior citizens)
Rate (%) NIL
Income Tax Rates/Slabs1,80,001 – 5,00,000
Rate (%)10
Income Tax Rates/Slabs5,00,001 – 8,00,000
Rate (%)20
Income Tax Rates/Slabs8,00,001 and above
Rate (%)30

Except for tax exemption on interest on fixed deposits in NRE Accounts, NRE and NRO have same tax slabs.

Tax amendments for the FY 2011-12 are mentioned below:

>Basic tax exemption of Rs 100,000 for investment in PPF, Insurance Premium, Mutual Fund ELSS, etc. us 80C .

>Additional tax exemption of Rs. 20,000 on investment in tax saving Infrastructure bonds.

>Senior citizen age reduced from 64 years to 60 years .

> People above 80 years of age to be included in the newly introduced 'Very Senior citizen'category and their basic exemption limit increased to Rs 500,000.

>Surcharge is not applicable, education cess of 3% on income-tax is levied .