What is a PIS Letter and how do I get this PIS Letter?

What is a PIS?

As an investor, you must have come across the term PIS. PIS term refers to a designated investment route for NRIs and PIS's full form is Portfolio Investment Scheme. PIS account for NRI is a facility under which RBI allows Non-Resident Indians (NRIs) to invest in Indian Stock Markets. 

Under the Portfolio Investment Scheme, NRIs can buy or sell shares or units in shares, debentures, or bonds with RBI’s prior approval. You need to apply for a PIS account through a bank where you hold a Non-Resident account. Only designate banks authorized by RBI to offer PIS account schemes, Banks designate specific branches where PIS accounts are opened and PIS transactions are undertaken.

Benefits of PIS?

• PIS Account allows the NRI community an easy way to invest in the buoyant Indian equity markets even when not they are not living in India. NRIs can expand their investment portfolio to take advantage of the emerging Indian equity market. 

• PIS Scheme is very convenient for NRI investors. You can operate the PIS in a paperless online mode.  There is no hassle in filling out forms for every transaction. There is no need to courier any forms or transaction slips.

• PIS gives you peace of mind as it takes into account the applicable tax laws making the process completely compliant with RBI rules. 

• You can access your portfolio through an online log-in 24*7 with a PIS scheme saving time and effort. It allows you to take online investment calls as per market conditions.

• You can buy, sell securities at your ease and repatriate the funds without any hassle freely.

• Using the Power of Attorney mandate, you can even designate another family member or relative to operate the account. This ensures that the account remains active and you can give instructions even when not in the country.

How To Use PIS Account:

NRE PIS account is opened for investments done from NRE funds i.e. funds that can be repatriated. NRO or non-repatriable investments do not require any PIS account.

Eligible Entities for Opening an NRE PIS Account

The following entities are eligible to open an NRE PIS Account:

• Non-Resident Indian 

• PIO (Person of Indian Origin)

• OIC (Overseas Citizen of India)

Resident Indians cannot open a PIS. Similarly, Indian travelling overseas for short-term travel, stay, etc. are not eligible to open a PIS account.

RBI recently relaxed the PIS norms for an NRO account. Now there is no PIS requirement for NRO Accounts. Earlier an NRI was required to open separate NRE and NRO PIS accounts. NRE PIS was opened for any investments done on a repatriable basis and NRO PIS was opened for investments done on a non-repatriable basis. Now, there is no PIS account required for NRO accounts or non-repatriable investments. You can open an NRO account, NRI demat, and trading account and transact without any RBI approval. 

Transactions That Are Allowed Under NRE PIS Are:

• You are permitted to buy shares in Indian entities through stock exchanges and brokers.

• You can sell any shares purchased through the PIS account.

• Shares allotted through a stock split can also be transacted through the PIS Account.

 Transactions That Are Not Permitted Through The PIS Account Are:

• Shares bought as resident Indians

• Bonus or Rights shares

• Shares bought via non-PIS account

• Any shares received as gift transfers

• Shares received as ESOPs 

How do I get this PIS Letter?

To obtain a PIS approval letter from RBI, you need to open an NRE PIS Account. The following documents are required to open an NRE PIS account:

• Valid passport copy

• Proof of NRI status i.e. Visa copy, Work/Residence permit

• Indian PAN Card copy. 

• Proof of India and Overseas address from the bank’s acceptable document list.

• OCI/PIO Card

• You need to fill in the PIS Form and apply for the PIS Letter along with the account opening documentation. PIS Letter is basically an approval from RBI permitting NRI to invest in the Indian market through the designated PIS account only.

• The PIS accounts are opened as savings bank accounts with the sole purpose of transacting in stock markets. PIS account holders do not receive any chequebook for the account. Any transaction in the account, like withdrawal or transfer, requires approval.

• To transact in shares, you will have to open NRI demat and trading account online with the bank itself, or a broker.

• A tax is deducted on capital gain accrued in your account upon selling a share. This TDS is deducted as per the applicable tax rate for NRIs in the financial year. A TDS certificate is issued for this deduction.

• You can set off losses in your PIS Account against profits for capital gains calculation. This provision makes it attractive for NRIs to use the NRE PIS facility.