Portfolio Investment Scheme Account

The Portfolio Investment Scheme (PIS) is a scheme of Reserve Bank of India defined in Schedule 3 of the Foreign Exchange Management Act 2000. As per the scheme, NRIs can purchase and sell shares and convertible debentures of Indian Companies on a recognised stock exchange by routing such purchase/sale transactions through their account with a Designated Bank Branch (with effect from 29/11/2001 RBI has restricted OCBs from making fresh purchases. They can however continue their existing holdings or sell off the same).

No.

The PIS account cannot be a joint account. As per recent RBI guidelines, NRIs should have a separate bank account exclusively for PIS purposes. Transactions relating to their personal banking as well as on account of transactions relating to shares acquired other than under PIS including IPOs should be routed in a separate bank account not linked to their PIS Account/s.

No. NRIs cannot sell without taking delivery of the shares/convertible debentures purchased. Short selling is not permitted under PIS.

Yes. Investment can be made on repatriation as well as non-repatriation basis. However, the investor will have to open NRE account as well as NRO account under PIS with the same Designated Bank.

NRIs can assign only one Designated Bank for the purpose of routing the transactions under PIS for NRE and NRO. NRIs cannot maintain NRE and NRO accounts under PIS with different authorised dealers.

NRIs will have to off load such portion of the holding, which is in excess of the prescribed limit.

Yes. NRIs can purchase upto a maximum of five percent of the paid up capital of a company and maximum of five percent of paid up value of each series of debentures. For the purpose of this ceiling investment in repatriable and non-repatriable will be clubbed. In addition to the above, NRIs collectively can hold upto a maximum of 10% of such holding or any higher percentage so permitted in respect of any particular company. Shares/debentures acquired through primary market are excluded for the purpose of above limits.

Yes, as an NRI you can receive shares in inheritance. RBI permission is not required to be obtained and the shares will be held on non-repatriable basis.

The shares purchased through primary/secondary markets as a resident will be held on non-repatriation basis. Once the customer becomes an NRI, these shares can be credited to an NRO DEMAT Account. These shares can be sold in the secondary market without PIS permission. The sale proceeds can be credited to NRO SB Account after payment of capital gain taxes

No, as an NRI you can purchase shares in the primary market on repatriable/non repatriable basis and application money can be paid through regular NRE SB/NRO SB Account or through inward remittance.

The Reserve Bank of India monitors the investment position of NRIs/FIIs in listed Indian companies, reported by designated banks, on a daily basis. When the total holdings of NRIs/FIIs under the Scheme reaches the limit of 2 percent below the sectoral cap, Reserve Bank will issue a notice (caution list) to all designated branches of designated banks cautioning that any further purchases of shares of the particular Indian company will require prior approval of the Reserve Bank.
Once the shareholding by NRIs/FIIs reaches the overall ceiling / sectoral cap /statutory limit, the Reserve Bank places the company in the Ban List. Once a company is placed in the Ban List, no NRI can purchase the shares of the company under the Portfolio Investment Scheme. List of caution/banned RBI script is available at http://www.rbi.org.in/scripts/BS_FiiUSer.aspx

No. A new Section 112A is proposed to tax LTCG on gain on transfer of listed equity shares @ 10%, for gains in excess of Rs. 1 lakh. This provision is applicable from April 1, 2018.

The bank is required to deduct tax from the capital gains on sale of shares at specified rates of 15% (plus Health and Education Cess @ 4%) on short-term capital gains.

Shares purchased under PIS on stock exchange shall be sold on stock exchange only. Such Shares cannot be transferred by way of sale under private arrangement or by way of gift (except by NRIs to their relatives as defined in Section 6 of Companies Act, 1956 or to a charitable trust duly registered under the laws in India) to a person resident in India or outside India without prior approval of the Reserve Bank of India.

Yes, NRIs are allowed to invest in futures and options segment of the exchange out of Rupee funds held in India on non repatriation basis, subject to the limits prescribed by SEBI.

FEMA provisions allow Indian companies to issue Rights / Bonus shares to existing non-resident shareholders, subject to adherence to sectoral cap as may be applicable.

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.

Yes. It is the responsibility of the NRI 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.

Enhanced set-off facility is a feature by which current losses on PIS transactions can be nullified against future profits, thereby enabling you to save Capital Gains tax. The facility is offered at portfolio level during the financial year.

Salient features

• Set-off of losses will be permitted against future profits only & not against earlier profits
• Losses can be carried forward till last day of the financial year or till it is completely set-off, whichever is earlier
• Profits cannot be carried forward and Capital Gain tax will be calculated on a net profit (after adjusting previous losses, if any).

All amounts in INR

TDS calculated at 15.45%

Benefit to customer: INR 2,626.50 (A-B)

Yes, Enhanced set-off facility is provided at portfolio level during the financial year & therefore losses on NRO PIS transaction can be set-off against profits in NRE PIS transactions and vice-versa. However, please note that losses can be set-off only against future profits and not on earlier profits.