{"id":395720,"date":"2024-11-12T12:24:30","date_gmt":"2024-11-12T06:54:30","guid":{"rendered":"https:\/\/zerodha.com\/z-connect\/?p=395720"},"modified":"2024-12-12T18:06:06","modified_gmt":"2024-12-12T12:36:06","slug":"nre-or-nro-pis-or-non-pis-understanding-nri-accounts","status":"publish","type":"post","link":"https:\/\/zerodha.com\/z-connect\/varsity\/nre-or-nro-pis-or-non-pis-understanding-nri-accounts","title":{"rendered":"NRE or NRO? PIS or non-PIS? – Understanding NRI accounts"},"content":{"rendered":"

If you’re an NRI, managing finances in India can be tricky, especially with the various account types and investment options to consider.<\/span><\/p>\n

In this post, we’ll break down everything you need to know about NRE, NRO, PIS, and Non-PIS accounts and also discuss why NRIs from the U.S. and Canada face restrictions on investing in Indian mutual funds.<\/span><\/p>\n

Who is an NRI?<\/b><\/h4>\n

An NRI, or Non-Resident Indian, is an Indian citizen or a person of Indian origin who resides outside India for employment, business, or any other purpose that indicates an intention to stay abroad for an indefinite period. The Indian Income Tax Act defines NRIs based on their physical presence in India during the financial year, with specific conditions that must be met to qualify. Broadly speaking if you live outside India for 182 days or above, you are an NRI.<\/span><\/p>\n

What Are NRE and NRO Accounts?<\/b><\/h4>\n

Non-Resident External Account (NRE) and Non-Resident Ordinary Account (NRO) accounts are bank accounts designed specifically for NRIs, to help them manage their income earned abroad and in India. The differences between the two are:<\/span><\/p>\n\n\n\n\n\n\n\n\n\n
Feature<\/b><\/td>\nNRE<\/b><\/td>\nNRO<\/b><\/td>\n<\/tr>\n
Purpose<\/span><\/td>\nFor NRIs to park <\/span>foreign earnings<\/b> in India<\/span><\/td>\nFor NRIs to manage income <\/span>earned in India<\/b><\/td>\n<\/tr>\n
Repatriation<\/span><\/td>\nFunds are <\/span>fully repatriable<\/b>. No additional formalities.<\/span><\/td>\nLimited to<\/span> $1 million<\/b> per financial year. Must submit Form 15CA and Form 15CB, which can be obtained from their bank every time to repatriate.<\/span><\/td>\n<\/tr>\n
Taxation<\/span><\/td>\nInterest earned is <\/span>tax-free<\/b> in India<\/span><\/td>\nInterest earned is <\/span>taxable<\/b> in India<\/span><\/td>\n<\/tr>\n
Currency<\/span><\/td>\nMaintained in <\/span>\u20b9<\/b><\/td>\nMaintained in <\/span>\u20b9<\/b><\/td>\n<\/tr>\n
Deposit<\/span><\/td>\nDeposits in <\/span>foreign currency<\/b><\/td>\nDeposits in <\/span>both foreign currency and \u20b9<\/b><\/td>\n<\/tr>\n
Withdrawal<\/span><\/td>\nWithdrawals in <\/span>\u20b9<\/b><\/td>\nWithdrawals in <\/span>\u20b9<\/b><\/td>\n<\/tr>\n<\/tbody>\n<\/table>\n

What are PIS and Non-PIS?<\/b><\/h4>\n

While NRE and NRO accounts are bank accounts, PIS (Portfolio Investment Scheme) and Non-PIS refer to specific types of investment routes for NRIs in India. The differences between the two are:<\/span><\/p>\n\n\n\n\n\n\n
Feature<\/b><\/td>\nPIS<\/b><\/td>\nNon-PIS<\/b><\/td>\n<\/tr>\n
Purpose<\/span><\/td>\nFor direct equity investments in Indian stock markets<\/span><\/td>\nFor other investments, including mutual funds, bonds, and non-equity securities, some of which may be traded on stock exchanges<\/span><\/td>\n<\/tr>\n
Shareholding restrictions<\/span><\/td>\nRBI has an upper cap on NRI shareholding in a company<\/span><\/td>\nNo restrictions<\/span><\/td>\n<\/tr>\n
Regulation<\/span><\/td>\nGoverned by RBI. A PIS letter from RBI is required to make investments<\/span><\/td>\nNot governed by RBI<\/span><\/td>\n<\/tr>\n<\/tbody>\n<\/table>\n

Below is a <\/span>table<\/b> outlining what is allowed and what isn\u2019t for each of these accounts:<\/span><\/p>\n

\"\"<\/p>\n

Please note that, as per the rules, the only available route to investing in equity markets directly is the NRE PIS account.\u00a0<\/em><\/strong><\/h4>\n

Why do NRIs from the U.S. and Canada fac<\/b>e restrictions in mutual fund investments?<\/b><\/h4>\n

NRIs from the U.S. and Canada often face difficulties when trying to invest in Indian mutual funds due to several regulatory hurdles, primarily revolving around FATCA. <\/span>The Foreign Account Tax Compliance Act (FATCA) mandates that financial institutions report details about taxpayers to the Internal Revenue Service (IRS) on a daily basis. This increases compliance burdens for the Asset Management Companies (AMCs). Failure to comply with the regulations can lead to hefty penalties.\u00a0<\/span><\/p>\n

AMCs that allow NRIs from the USA and Canada to invest in mutual funds do so with many terms and conditions. The following AMCs are some that allow NRIs from the USA and Canada to invest as on the date of publishing this article:<\/span><\/p>\n

    \n
  • Aditya Birla Sun Life Mutual Fund<\/span><\/li>\n
  • Nippon India Mutual Fund<\/span><\/li>\n
  • Quant Mutual Fund<\/span><\/li>\n
  • Sundaram Mutual Fund<\/span><\/li>\n
  • UTI Mutual Fund<\/span><\/li>\n
  • Parag Parikh Financial Advisory Services AMC<\/span><\/li>\n<\/ul>\n

    Check with the respective AMC for more details.<\/span><\/p>\n","protected":false},"excerpt":{"rendered":"

    If you’re an NRI, managing finances in India can be tricky, especially with the various account types and investment options to consider. In this post, we’ll break down everything you need to know about NRE, NRO, PIS, and Non-PIS accounts and also discuss why NRIs from the U.S. and Canada face restrictions on investing in […]<\/p>\n","protected":false},"author":242540,"featured_media":390082,"comment_status":"open","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"_jetpack_newsletter_access":"","_jetpack_dont_email_post_to_subs":false,"_jetpack_newsletter_tier_id":0,"_jetpack_memberships_contains_paywalled_content":false,"_jetpack_memberships_contains_paid_content":false,"footnotes":""},"categories":[477],"tags":[1108,1107,1109,352,1110,1106,806],"class_list":["post-395720","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-varsity","tag-invetsing","tag-non-pis","tag-nre","tag-nri","tag-nro","tag-pis","tag-trading"],"yoast_head":"\nNRE or NRO? 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