PIS vs Non-PIS Account: Key Differences for NRIs

Are you an NRI looking to invest in the Indian stock market? You will need an NRI investment account to get started. But before you do, you must understand the difference between a PIS vs Non-PIS account. PIS (Portfolio Investment Scheme) accounts let you buy and sell Indian stocks on a repatriable basis. On the other hand, a Non-PIS account allows investments using local non-repatriable funds. Both NRI trading account options work differently when it comes to money transfers and rules. A key difference lies in the NRE/NRO account repatriation of your funds. Let us dive into the details!

What is a PIS Account?

Under the Reserve Bank of India (RBI) and FEMA rules, PIS stands for Portfolio Investment Scheme. It is a special route created for NRIs to buy and sell shares of Indian companies in the secondary market. If you want to trade in Indian equities and send the money back to your home country, you must have this account.

There are two main types of PIS accounts. An NRE-PIS account uses funds from your NRE bank account, meaning the money and profits are fully repatriable. An NRO-PIS account uses local Indian income, making the funds non-repatriable beyond a certain limit.

To protect Indian companies, the RBI has set strict limits. A single NRI cannot hold more than 5% of a company’s paid-up capital. Also, the total holdings of all NRIs in a single company are capped at 10%, though this can be increased to 24% in special cases.

What is a Non-PIS Account?

A Non-PIS account is a simpler way for NRIs to invest in India without the strict RBI reporting of the PIS route. This account is directly linked to your regular NRO savings account. It is mainly used for non-repatriable investments.

You fund this account using income earned locally in India. This includes money like dividends, rental income, or pensions. You can also transfer money from abroad into your NRO account to use for Non-PIS investments.

Recently, many top brokerages are shifting towards the Non-PIS route. The reason is simple. It offers lower costs, zero banking PIS charges, and an easier setup process. You also get wider investment choices, making it a great NRI trading account option. Plus, modern platforms like Pocketful can help you set up an account easily to begin your investment journey.

PIS vs Non-PIS Account: Key Differences

Let us look at a simple comparison of a PIS vs Non-PIS account.

• RBI Reporting Requirements: A PIS account requires daily reporting to the RBI by your bank. A Non-PIS account does not need this strict daily reporting.
• Linked Bank Account: PIS accounts are usually linked to an NRE bank account for full NRE/NRO account repatriation of funds. Non-PIS accounts are linked to an NRO account, where repatriation is restricted to $1 million per financial year.
• Costs and Charges: PIS accounts have higher fees due to bank charges for RBI reporting. Non-PIS accounts are much cheaper as they do not involve these extra banking fees.
• Allowed Categories of Investment: Through PIS, you can mainly trade delivery equity shares. Through a Non-PIS account, you can invest in delivery equity, IPOs, Futures and Options (F&O), and mutual funds easily.

Read Also: What is Non-Repatriable Demat Account?

Investment Options in PIS vs Non-PIS Accounts

It is important to know what you can buy with each account. Here are the investment options for both routes:

• Listed Equity Shares: Allowed in both. You can buy and sell stocks for delivery in both PIS and Non-PIS accounts.
• IPOs: Allowed in Non-PIS accounts. You do not need a PIS account to apply for IPOs.
• Mutual Funds: Allowed under the Non-PIS route. You can freely invest in Indian mutual funds using your regular NRO or NRE account without the PIS tag.
• ETFs, Corporate Bonds, and Government Securities: Allowed under Non-PIS. You can easily diversify your portfolio with these safer assets without PIS permissions.
• F&O and Intraday Trading: Allowed only in Non-PIS accounts. If you want to trade in Futures and Options or do intraday trading, you must use a Non-PIS NRO account. PIS accounts strictly do not allow intraday or F&O trading.

Investment Avenue	Through PIS	Through Non-PIS
Listed Indian Shares	Secondary-market transactions, where permitted	Available under applicable rules
IPOs	Based on applicable requirements	Available through the permitted route
Mutual Funds	Generally not covered under PIS	Available
ETFs	Based on the applicable framework	Available
Corporate Debt	Generally outside PIS	Available
Government Securities	Subject to applicable requirements	Available
REITs	Subject to applicable requirements	Available
InvITs	Subject to applicable requirements	Available
F&O / Intraday Trading	Route-specific eligibility applies	Available subject to applicable rules and broker facilities

How Do PIS and Non-PIS Accounts Work?

Understanding the money flow is important. Here is how both of these NRI investment account types work.

Step-by-step flow for the PIS route:

• You start by adding money to your NRE or NRO bank account.
• The bank allocates this money to your special PIS bank account.
• The bank reports your PIS balance to the RBI and your broker.
• You place an order in your NRI trading account.
• When you buy or sell, money flows between the PIS account and your linked demat account seamlessly.

Step-by-step flow for the non-PIS route:

• You deposit funds into your regular NRO savings account.
• You transfer these funds directly to your linked NRI trading account.
• You place your trade on your broker’s platform.
• The shares are instantly credited to or debited from your demat account without any extra bank reporting steps.

Benefits of a PIS Account and a Non-PIS Account

Both accounts have unique perks for the Indian audience. Let us check them out.

Benefits of a PIS Account

• Regulatory Compliance: It perfectly follows all RBI and FEMA guidelines for foreign money.
• Automated RBI Reporting: Your bank handles all the complex reporting for you.
• Full Repatriation: An NRE-PIS account allows you to take your invested money and profits back to your home country freely.
• Easier Tax Tracking: The bank automatically calculates and deducts the required TDS on your equity trades.

Benefits of a Non-PIS Account

• Lower Cost: You avoid the hefty annual maintenance and reporting fees charged by PIS banks.
• Easier Setup: The paperwork is much simpler, and account opening is faster.
• Fewer Restrictions: You do not have to worry about the 5% individual or 10-24% aggregate RBI limits.
• Wider Investment Access: You can trade in F&O, mutual funds, and IPOs effortlessly.

Is a PIS Account Mandatory for NRIs?

Many NRIs wonder if a PIS account is compulsory. The simple answer is no, it is not always mandatory.

You only need a PIS account if you want to buy and sell secondary market equity shares on a repatriable basis. If you are using your NRE funds for buying stocks and want to send the profits abroad, PIS is compulsory.

However, PIS is not needed for many other investments. You do not need it if you only want to invest in IPOs, mutual funds, or bonds. You also do not need it if you wish to trade in F&O or do non-repatriable NRO trading.

Remember, RBI rules state that one NRI can hold only one designated PIS account at a time. You cannot have multiple PIS accounts across different banks.

Which Account Should an NRI Choose?

Choosing the right account depends completely on your investment goals. Here is a quick guide to help you decide.

• For full repatriation: If you want full repatriation of your equity gains, choose the NRE-PIS account.
• For mutual funds and bonds: If you mainly want to invest in mutual funds or government bonds, a simple Non-PIS NRO account is all you need.
• For active trading: If you want to trade in F&O or do intraday trading, you must select the Non-PIS account. PIS does not allow this.
• For diversified investors: If you want the best of both worlds, you can open both. Use PIS for long-term repatriable stock investments and a Non-PIS account for trading and mutual funds.

If you are looking for an effortless experience, Pocketful can help you set up an NRI trading account suited exactly to your investor profile.

Common Mistakes NRIs Should Avoid

Starting your investment journey in India can be tricky. Avoid these common mistakes:

• Assuming every investment needs a PIS account: Many NRIs think they need PIS for mutual funds and IPOs, which is false.
• Linking PIS mandate to the wrong or multiple banks: You are legally allowed only one PIS account. Opening multiple can lead to severe regulatory issues.
• Ignoring FEMA repatriation limits: Remember that NRO funds have a strict $1 million annual limit for sending money abroad.
• Confusing the PIS account with the demat account: A PIS account is just a banking permission, whereas a demat account actually holds your shares.
• Choosing an account type without checking eligibility rules: Always check what instruments are allowed. For instance, do not open a PIS account if your main goal is F&O trading.

Read Also: What is a Repatriable Demat Account?

Conclusion

Both PIS and Non-PIS accounts serve different purposes for NRIs. Neither is strictly better than the other. A PIS account is wonderful if sending money abroad is your top priority. On the flip side, a Non-PIS account shines when it comes to lower costs and wider investment options. Keep your goals in mind, keep a balanced approach, and always remind yourself to check the current RBI/FEMA rules. It is also a good idea to consult your bank or broker before making your final choice.

To open your NRI trading and demat account and get started with your investments in India, download Pocketful – offering users zero brokerage on delivery trades and an easy-to-use platform designed for both beginners and experienced investors.

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