NRI investment in PMS
An NRI uses the same PMS as a resident, but the money route decides whether the gains can go back abroad.
An NRI can invest in PMS on the same terms as a resident: the same ₹50 lakh minimum, the same agreement, the same portfolio. What differs is the plumbing. Foreign exchange rules decide which bank account the money comes from, which account the shares sit against, and whether the sale proceeds can go back abroad. Tax rules decide how much is deducted before that happens.
Take an NRI in Dubai with ₹80 lakh to invest. The first question is not which strategy, it is whether this money must be repatriable.
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Repatriable vs non-repatriable
RBI direction
Repatriation basis
Annex 3 of the Foreign Investment Master Direction
Non-repatriation basis
Annex 4
Funded from
Repatriation basis
Inward remittance, or a repatriable account (NRE or FCNR) designated for these investments
Non-repatriation basis
Inward remittance, or NRE, FCNR(B) or NRO account funds
Proceeds
Repatriation basis
Sale proceeds, net of taxes, can be remitted abroad
Non-repatriation basis
Credited only to the NRO account, whichever account paid for the purchase; the amount invested and its appreciation cannot be repatriated under this route
Limits on listed shares
Repatriation basis
Each individual below 10% of a company's paid-up capital; all individual non-residents together up to 24%
Non-repatriation basis
No limit; treated like a domestic investment
Trades
Repatriation basis
Through a designated authorised dealer bank branch
Non-repatriation basis
No designated-branch requirement in Annex 4
| Repatriation basis | Non-repatriation basis | |
|---|---|---|
| RBI direction | Annex 3 of the Foreign Investment Master Direction | Annex 4 |
| Funded from | Inward remittance, or a repatriable account (NRE or FCNR) designated for these investments | Inward remittance, or NRE, FCNR(B) or NRO account funds |
| Proceeds | Sale proceeds, net of taxes, can be remitted abroad | Credited only to the NRO account, whichever account paid for the purchase; the amount invested and its appreciation cannot be repatriated under this route |
| Limits on listed shares | Each individual below 10% of a company's paid-up capital; all individual non-residents together up to 24% | No limit; treated like a domestic investment |
| Trades | Through a designated authorised dealer bank branch | No designated-branch requirement in Annex 4 |
PIS: the name the workbook uses
The Portfolio Investment Scheme (PIS) is the RBI route under which non-residents buy listed shares on Indian exchanges through a designated bank, and the XXI-A syllabus still uses that name. RBI's Master Direction, as updated to June 15, 2026, now frames it as investment on repatriation basis by any individual person resident outside India, NRIs and OCIs included, sets the per-individual limit below 10% with a 24% aggregate, and re-designates old "NRO (PIS)" accounts as plain NRO accounts. Older material describes lower individual limits and separate PIS accounts.
How the Dubai client's account is set up
- 1
Choose the route
Money earned abroad and wanted back abroad: repatriable, funded by remittance or from an NRE account. Money already in NRO: non-repatriable.
- 2
Bank account
Designate the NRE account (repatriable) for these investments with the bank, or use the NRO account (non-repatriable).
- 3
Demat and PMS account
Open a demat account tagged to the route and complete PMS onboarding: Disclosure Document, KYC as a non-resident, agreement and fee annexure.
- 4
Invest
The PM buys through the designated bank arrangement, which tracks the RBI limits for repatriable holdings.
- 5
Exit
On sale, tax is deducted at source; the net proceeds go back to the NRE account and can be remitted abroad.
Free account, this exam preselected.
How NRI income from PMS is taxed
- check_circleCapital gains rates are the same as for residents: 20% on short-term gains from listed equity, 12.5% on long-term gains above ₹1.25 lakh (Income-tax Act, 2025, s.196 and 198; 111A and 112A of the 1961 Act for gains before April 1, 2026).
- check_circleThe basic exemption shortfall cannot be used against these gains; that relief is only for resident individuals and HUFs.
- check_circleTax is deducted at source on gains paid to a non-resident (s.393(2), the successor to section 195), so the NRI receives net proceeds and claims credit in the return.
- check_circleDividends to a non-resident are taxed at 20% (s.207), deducted at source, unless a tax treaty gives a lower rate.
- check_circleA treaty rate applies only if the NRI qualifies under India's agreement with their country of residence and provides the required certificate (s.159). Whether the country of residence also taxes the gain is a matter for that country's rules.
How XXI-A tests this
Questions ask which account funds a repatriable investment (NRE, not NRO), what repatriation basis means (proceeds net of taxes can be sent abroad), and whether NRIs may invest in PMS at all (yes). Tax questions ask whether TDS applies to NRI gains (yes) and whether an NRI can adjust the basic exemption limit (no). The trap is old figures: limits and rates in older material and many question banks predate the July 2024 tax changes and RBI's 2026 update.
FAQs
Can an NRI invest in PMS in India?expand_more
Yes, with the same ₹50 lakh minimum as residents, either on a repatriable basis funded from an NRE account or remittance, or on a non-repatriable basis from an NRO account.
Is a PIS account needed for an NRI to invest in PMS?expand_more
A repatriable investment in listed shares has to go through a designated bank branch and a designated repatriable account, which is what PIS refers to. RBI's 2026 direction no longer uses a separate NRO (PIS) account.
How are NRI capital gains from PMS taxed?expand_more
At the same rates as residents, 20% short-term and 12.5% long-term above ₹1.25 lakh on listed equity, with tax deducted at source before proceeds are paid.
Can an NRI take PMS money back abroad?expand_more
Yes, if invested on a repatriation basis. Proceeds net of taxes can be remitted. Non-repatriable investments stay in the NRO account.