Understanding the Portfolio Investment Scheme (PIS): A Flow Chart Guide for NRIs

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• Posted on July 30, 2025

The Portfolio Investment Scheme (PIS) is a Reserve Bank of India (RBI) initiative that enables Non-Resident Indians (NRIs) to invest in India’s stock markets through their NRE (Non-Resident External) or NRO (Non-Resident Ordinary) accounts. If you’re an NRI looking to build wealth in India, understanding how PIS works is key, and the accompanying flowchart illustrates the relationships between the required accounts and the movement of funds and shares. Let’s explore the details for Portfolio Investment Scheme.

Key Elements for PIS Scheme : 

1. Trading Account

• Purpose: Acts as the main channel for executing buy and sell transactions on the stock exchange.
  
• Maintenance: Opened and maintained with a registered stock broker.

2. Demat Account

• Purpose: Reflects your portfolio by holding your shares in an electronic format.
  
• Maintenance: Also operated through your preferred stock broker.
  
• Flow: When you buy shares, they are credited here; upon selling, they are debited.

3. PIS NRE Account

• Purpose: Special account maintained with an RBI-approved bank, dedicated for stock transactions under the PIS route.
  
• Flow:
  • Funding Purchases: On buying shares, the amount is debited from this account.
  • On Selling Shares: Sale proceeds are credited back.
    
• Note: Directly linked to your Trading Account for seamless fund movement.

4. NRE Account

• Purpose: General account for holding foreign earnings, remittances, and other NR-related funds.
  
• Flow: The PIS NRE account is funded from here.

How the System Works in Portfolio Investment Scheme (PIS)

Understanding the flow of transactions in the Portfolio Investment Scheme (PIS) is crucial for NRIs investing in Indian stocks. Here’s a step-by-step breakdown of the process:

1. Funding and Account Setup

• You start by maintaining an NRE account with an Indian bank to hold your foreign earnings.
  
• A special PIS NRE account is linked to your NRE account, exclusively for stock market transactions as per RBI regulations.

2. Funding the PIS NRE Account

• When you wish to invest, money is transferred from your NRE account to the PIS NRE account.
  
• The PIS NRE account ensures all trading is monitored for regulatory compliance.

3. Executing Stock Transactions

• Using a Trading Account with a registered stock broker, you initiate share purchases or sales.
  
• On a share buy, the corresponding amount is debited from your PIS NRE account.
  
• For a share sale, the proceeds are credited back to your PIS NRE account.

4. Holding Securities

• All bought shares are credited to your Demat Account, which electronically stores your holdings.
  
• Sold shares are debited from the Demat Account.

5. Seamless Integration

• The flow ensures strict separation of funds for legal compliance, easy tracking, and effortless repatriation of gains to your foreign account.
  
• Each transaction is transparently routed through dedicated channels, creating a clear audit trail and making investment management straightforward and efficient.

Portfolio Investment Scheme: Benefits for NRIs

• Legally Compliant: Follows RBI guidelines, ensuring your investments are fully legal and transparent.
  
• Seamless Repatriation: Funds (including profits and capital) in your NRE PIS account are fully repatriable, making it easier to transfer money abroad.
  
• Simple Online Process: Linked accounts allow you to perform all necessary steps online, often via your broker’s and bank’s portals.
  
• Clear Audit Trail: Each transaction is routed through dedicated PIS accounts, assisting with tax compliance, reporting, and easier tracking.
  
• Wide Access: Allows investments in shares, convertible debentures, and government securities listed on stock exchanges in India.

Who Should Opt for PIS?

• Any NRI or PIO (Person of Indian Origin) who wishes to invest in Indian equity markets legally and conveniently.
  
• Individuals seeking efficient portfolio management, transparent taxation, and smooth cross-border remittance.

Points to Remember

• NRIs must route secondary market transactions in Indian equities exclusively through the PIS account.
  
• If you wish to invest from both sources, separate PIS accounts must be maintained for NRE and NRO funds.
  
• Annual Reporting Requirement: Many banks require NRIs to submit yearly or periodic portfolio investment reports for compliance purposes, which helps satisfy regulatory norms and ensures smooth repatriation of funds.
  
• Adherence to RBI Purchase Limits: NRIs must stay within the purchase limits defined by the Reserve Bank of India, which restrict investment to a certain percentage of a company’s paid-up capital to avoid exceeding prescribed thresholds.

Conclusion

The Portfolio Investment Scheme offers NRIs a structured, transparent, and RBI-compliant route for investing in Indian equities. By maintaining a dedicated set of accounts—Trading, Demat, PIS NRE, and NRE- you can efficiently manage your investments, repatriate gains, and comply with all regulatory norms. This unique ecosystem is designed for financial growth while ensuring complete peace of mind.

If you’re seeking support beyond investments, NRI Grow offers comprehensive services from asset and tax management to legal help so you can stay worry-free while living abroad.