An Indian citizen who moves abroad and becomes an NRI can no longer hold a resident demat account. The choice is between a repatriable account linked to NRE banking under the Portfolio Investment Scheme (PIS) and a non-repatriable account linked to NRO banking. It looks like a banking detail, but it isn't. The two routes differ in which instruments you can access, how sale proceeds flow, how much you can send abroad each year, and what compliance trail each leaves with the RBI. Neither is objectively better; the right choice depends on where your investable funds come from and whether you intend to repatriate.
The sections below compare the two account structures, explain the PIS requirements, tax and documentation rules, and help determine which route better fits different NRI investing needs.
#The Two Account Structures
#NRE-PIS (repatriable route): The underlying account is an NRE Savings Account, with principal and interest freely repatriable and interest exempt from Indian income tax. A dedicated NRE-PIS account is opened with your designated Authorised Dealer (AD) bank, and the demat account is marked as Repatriable with NSDL or CDSL. Funds must come only from foreign remittances or transfers from existing NRE or FCNR accounts.
#NRO Non-PIS (non-repatriable route): The underlying account is an NRO Savings Account, in which Indian-sourced income, such as rent, dividends, and legacy savings, is credited. PIS linkage is not required. Since the RBI's FEMA amendment of 2016 (FEMA 361/2016), the PIS permission and daily reporting requirements no longer apply to non-repatriable secondary-market equity purchases, and such investments are treated at par with resident investment.
#Structural rule: NSDL and CDSL require separate demat accounts for repatriable and non-repatriable securities. Many NRIs hold both; one for foreign-remitted funds and one for legacy Indian holdings.
#PIS: What It Requires and What It Does Not
- #PIS mechanics: the Portfolio Investment Scheme is administered by the RBI under FEMA. Only one AD bank per NRI is permitted, and the NRE-PIS account must be pre-funded before you place a buy order. On every trade day, the broker sends an electronic contract note to the AD bank, which reports to the RBI. NSDL and CDSL publish daily caution lists. When aggregate NRI holding reaches roughly 8% of a company's paid-up capital, it enters the caution list; at 10%, it is banned from further NRI purchases.
- #PIS is not required for IPOs (NRIs apply via ASBA or UPI through NRE or NRO accounts), rights issues, bonus shares, domestic mutual funds, ETFs at the time of subscription, PSU bonds, and listed NCDs. NRIs invest in these alongside residents without a PIS permission letter.
- #F&O access - the July 2025 simplification: SEBI's circular of 29 July 2025 abolished the mandatory Custodial Participant (CP) code requirement for NRIs trading exchange-traded derivatives. Position limits are now PAN-based at the client level, identical to domestic investors. F&O remains available only through NRO Non-PIS accounts, and existing CP-code holders had until 27 October 2025 to exit. Currency and commodity derivatives remain prohibited for NRIs.
#Tax Treatment: Rates, TDS, and DTAA Relief
Capital gains rates are identical whether securities are held through NRE-PIS or NRO Non-PIS. TDS may apply to NRI investors on specified income and securities transactions, subject to the applicable tax provisions. Rates changed substantially from 23 July 2024 under the Union Budget 2024.
All rates are base rates; Health and Education Cess at 4% and any applicable surcharge are added on top.
#Surcharge on equity gains capped at 15%
A Budget 2022 amendment to Sections 111A and 112A caps the surcharge on NRI income from listed equity, equity mutual funds, and dividends at 15%, regardless of total income. Above ₹2 crore, the general surcharge reaches 25% or 37%, but only 15% applies on equity gains.
#Dividend TDS under Section 195
Dividends paid to NRIs are governed by Section 195, not Section 194 (which covers residents), and there is no minimum threshold; every rupee of dividend is subject to TDS. Effective TDS on dividends is roughly 20.80% for amounts below ₹50 lakh, 22.88% for amounts between ₹50 lakh and ₹1 crore, and 23.92% for amounts above ₹1 crore. Interest on NRO accounts attracts TDS at 30% plus surcharge and cess.
#DTAA relief
India has signed Double Taxation Avoidance Agreements with over 90 countries, and treaty rates override domestic TDS where more beneficial. To claim the treaty benefit at source, you must obtain a Tax Residency Certificate (TRC) and submit Form 10F to the Indian payer before payment. Without both on file, the payer applies domestic rates; the treaty does not apply automatically. Any excess TDS is reclaimed via ITR-2.
#Documentation and Repatriation
#Core KYC for all NRI accounts: PAN card (mandatory), valid passport, OCI card or valid visa for foreign-passport holders, overseas address proof (driving licence, foreign bank statement, or utility bills not older than two months), FATCA and CRS declaration, and DDPI (Demat Debit and Pledge Instruction), which can be used to authorise specific debit and pledge instructions from a demat account.. KYC documents must be attested by an overseas branch of a scheduled commercial bank, a Notary Public, or the Indian Embassy/Consulate.
#Additional for NRE-PIS: The PIS Permission Letter from the designated AD bank, carrying the RBI reference number, is required before opening the NRE-PIS demat and trading account.
#Repatriation from NRO: NRIs may repatriate up to USD 1 million per financial year across all NRO accounts. Required: Form 15CA (self-declaration), Form 15CB (a CA's certificate when the FY aggregate exceeds ₹5 lakh), Form A2 (FEMA declaration), and source-of-funds proof. Current income including dividends and interest is freely repatriable with no cap.
Which Route Fits Which NRI
- #NRE-PIS fits Gulf-based NRIs (UAE, Qatar, Saudi Arabia) earning in foreign currency and remitting to NRE accounts, NRIs planning to stay abroad long-term who want a fully repatriable portfolio with no annual cap, and investors comfortable with a designated AD bank structure and daily PIS reporting.
- #NRO Non-PIS fits NRIs with significant Indian-sourced income (rent, dividends, inherited assets) that accumulates in NRO accounts, active traders seeking intraday equity or F&O access, and investors whose annual repatriation needs remain within USD 1 million.
Investments in securities markets are subject to market risks. Read all the related documents carefully before investing. FEMA and tax rules for NRIs change periodically. Consult a FEMA-qualified advisor and a tax professional before making account or investment decisions.
#Conclusion
For an NRI, the account you open decides more than where your money sits; it sets which instruments you can trade, how freely your proceeds move abroad, and how much compliance you carry. Choose NRE-PIS if your funds are foreign-earned and you want full repatriability with no annual cap; choose NRO Non-PIS if you're deploying Indian-sourced income, want intraday or F&O access, and stay within the USD 1 million repatriation limit. Many NRIs run both.
Open a Demat account with SMC once you've chosen the structure that fits your funding source, trading needs, and repatriation plans.
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