Introduction
Most are aware of the essentials needed to participate in the Indian stock market, such as a Demat account. However, if you are a Non-Resident Indian (NRI) keen on investing in the Indian stock market, then you need a PIS letter. This probably sounds technical, but don’t worry, because it is pretty simple. You will be one step closer to making sure you follow the rules when you start trading in the Indian stock market once you know what a PIS letter is and how to receive one. Read on to find out more!
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What is a PIS Letter?
Portfolio Investment Scheme (PIS) was launched by the Reserve Bank of India (RBI) that allows NRIs, People of Indian Origin (PIOs), and Foreign Institutional Investors (FIIs) to invest in the Indian stock markets. Under this scheme, the investments can be made on a repatriable or a non-repatriable basis. Simply put, a PIS letter is essentially a license that conveys compliance with RBI’s regulations before you, an NRI, can start trading on the Indian stock market.
Why is a PIS Letter Needed?
The RBI is in charge of regulating India's stock markets. One portion of regulation that has to do with NRIs participating in the stock market is where the PIS letter comes in. Here's why the PIS letter is so important:
- The PIS letter is more than simply a piece of paper; it makes sure that all rules are followed. It shows that those who don't live in India can still trade on the Indian stock markets.
- It ensures tax compliance and reporting by banks, brokers, and other platforms involved in execution of trade in the stock market.
- A PIS letter is needed for smooth execution of trades by allowing authorised brokers to link a non-resident’s account for buying and selling shares.
- Apart from all this, it also ensures the investments and resultant repatriations are channelled via the designated accounts.
How to Get a PIS Letter?
Select an Authorised Bank
Under the PIS, the RBI has designated certain banks to issue PIS letters. Check to ensure the bank you are approaching is authorised to issue a PIS letter.
Open a Savings Account
Before obtaining this letter, it’s important to decide whether you want to invest on a repatriable or a non-repatriable basis. For the former, a repatriable PIS account is needed, which will be linked to a Non-Resident External (NRE) account.
For the latter, a non-repatriable PIS account is required, which is related to a Non-Resident Ordinary (NRO) account. A repatriable account helps with overseas transfer of sale proceeds, while a non-repatriable one doesn’t. Depending on your requirements, choose one of these before applying for a PIS letter.
Gather the Documents and Fill the Forms
A PIS form must be filled out with essential documents confirming your identity, residential status, and address. Depending on whether you are an NRI or a PIO, the documents needed will differ. Some common documents required can include a valid passport with a valid visa or PIO/OCI card, proof of Indian and overseas address, recent passport-sized photographs, NRE or NRO account details, etc. Get in touch with your chosen bank to obtain a detailed list of documents.
Submission, Processing, and Receipt
The bank will check the paperwork and forms once they get them. After being checked, the same will be given to the RBI for approval. This process usually takes up to 10 business days after you submit it.
Once everything is in order, a PIS letter will be issued. Ensure you keep both digital and physical copies of this letter. During this process, you may have to pay certain fees, like a one-time setup cost, an annual maintenance fee, and transaction fees.
Upon receiving the PIS letter, share it with your authorised broker to start trading in India.
Conclusion
A PIS letter is so much more than another piece of official paperwork. It allows NRIs to invest in the Indian stock market. Once you know the process and assemble the required documents, you can begin your investing journey in India as an NRI. When in doubt, reach out to a professional for the necessary assistance and guidance.
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