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Post the COVID-19 pandemic, the number of retail investors in the Indian stock markets has shot up rapidly. While the total demat account holders in India were less than two crores before 2020, it proliferated to 18.50 crore by the year 2024. With a growing number of these accountholders being NRIs, this figure reflects a growing trend in investors using the Reserve Bank of India’s (RBI) Portfolio Investment Scheme (PIS).
The Portfolio Investment Scheme was devised under Schedule 3 of the Foreign Exchange and Management Act (FEMA) 2000 to permit NRI investors to invest in the Indian stock markets.
This article will help you understand PIS and how you can make the most of this scheme as a potential investor.
The RBI’s Portfolio Investment Scheme allows NRIs, including Persons of Indian Origin (PIOs) and Overseas Citizens of India (OCIs), to purchase and sell shares and Non-Convertible Debentures (NCDs) of Indian companies through the recognised stock exchanges in India. The beneficiaries of this scheme can invest in the share markets on a repatriation or non-repatriation basis.
Below are a few features of the Portfolio Investment Scheme you should know to understand it better -
The following entities are eligible to open a PIS account as per the RBI rules –
As per the FEMA Act, an Indian citizen who has lived in a foreign country for more than 182 days during a financial year can be considered an NRI. However, the RBI debars the following categories of people from opening a Portfolio Investment Scheme account –
You must link your NRI bank account with PIS to avail of the benefits under the Portfolio Investment Scheme. Below are the documents that you will require –
If eligible, you can start investing in stocks and NCDs through the Portfolio Investment Scheme in the following steps –
Investing in stocks through the Portfolio Investment Scheme entails certain risks, such as –
Returns from stock markets are never guaranteed. They depend highly on market fluctuations. But if you remain invested for the long term, there are high chances that you will gain positive returns from your investments.
Any profit earned from equity investments will be subject to tax laws in India. If you redeem your investments within one year, you will have to pay 20% as short-term capital gains tax. However, no tax is payable if your investments are held for over a year.
Your investments made in Indian instruments may be exposed to currency rate fluctuations. A decline in the forex rate of your domestic currency may bring down your investment profits.
Stock exchanges in India remain open for trading only from 9:30 AM to 3:30 PM as per the Indian Standard Time (IST). If you place your order after the closing time, it will get executed on the next trading day.
The Indian equity markets offer ample investment opportunities for NRIs. However, they will need to direct their investments through the RBI’s Portfolio Investment Scheme. As an NRI, you can use IDFC FIRST Bank NRI Banking Services to make your investment journey in India seamless.
For example, you can open an IDFC FIRST Bank PIS Account and start investing in stocks from the convenience of your home. Click here to get your PIS account instantly without incurring any additional charges.