Investing in Indian Shares for NRIs - A Guide

Portfolio Investment Scheme
Portfolio Investment Scheme (PIS) allows NRIs to invest in shares of Indian companies in the secondary market on a repatriation or non-repatriation basis. These must be either shares or convertible debentures sold or purchased through a registered stock broker on a recognized stock exchange.
Investments by NRIs
NRIs can invest on either a repatriation or non-repatriation basis using the PIS route for up to 5% of the paid up capital / paid up value of each series of debentures of listed Indian companies. This must fall within overall permissible limits and is subject to compliance with RBI (Reserve Bank of India) guidelines, which may change from time to time. Therefore it is wise to be familiar with the overall guidelines and keep up to date on the changes. You may require professional assistance to make sure you comply with the rules.
The NRI investor has to take delivery of the shares purchased and give delivery of shares sold. He cannot trade intra day (i.e. buy and sell on the same day).
On Repatriation basis
Investments on a repatriation basis must be made using funds sourced from foreign exchange through normal banking channels, or from funds held in NRE*/FCNR* accounts maintained in India.
On Non-repatriation basis
Investment in shares purchased on a non-repatriation basis can additionally be made by utilizing funds from NRO* accounts.
Restrictions on Sale/Transfer
Shares purchased by NRIs on the stock exchange under the PIS cannot be transferred by way of sale under private arrangement or by way of gift to a person resident in India or outside India without prior approval of RBI.
An NRI/OCB (Overseas Corporate Body) can appoint only one designated bank for the purpose of routing the transactions under PINS (Portfolio Investment Scheme is the permission that a NRI requires to trade in the Indian stock market. An NRI can have only one PINS account)
As per recent RBI guidelines, NRI/OCB should have a separate bank account exclusively for PINS purposes. Transactions relating to their personal banking as well as on account of transactions relating to shares acquired other then under PINS, including IPOs, should be routed in a separate bank account not linked to PINS.
The orders need not be placed through the designated bank. However, the reporting of the transaction must be made to the designated bank on the same day of transaction along with the original contract note. The payment and receipt of funds in settlement of such a trade has to be routed through the designated bank account.
Notes on Procedures for opening of PIS Account/ Demat/ Trading
Basic KYC (Know Your Customer) requirements are:
- PAN Card (mandatory)
- Overseas Address Proof (DL, Utility Bill and the latest bank statement)
- Indian Address Proof (this would include one or more of: Indian Passport, Driving License, Latest Bank Statement, Ration Card, Utility Bill)
- Passport/ Visa (copy of all the relevant pages)
- Non Citizens require a PIO/OCI** Card
- NRI must provide copy of Power of Attorney given to the Registered Broker for undertaking sale/purchase of shares on his behalf to the designated branch.
Regulations regarding NRI Trading:
• Intra-day trading is not allowed for NRI clients.
• The client must settle his transactions on Delivery Basis, hence has to take delivery of shares & give delivery of shares (
• Every sale transaction will be credited to client account net of tax. Hence for every sale transaction capital gains will be calculated. Long term capital gains are nil & for short-term a 15% capital gains tax will be charged (For FY08-09).
• TDS (Tax deducted at source) certificates will be issued by the bank and certificate charges will be levied for each sale transaction.
• No set off will be allowed but while filing returns the client can claim set off against the TDS deducted.
• NRI’s have restrictions on buying certain scrips (ie shares) which are daily updated on www.rbi.org.in
• If the client has bought restricted scrip then same will be reversed in the books of the broker & if loss occurred it will be debited to client’s account. Please note that profit will not be passed to client.