For Indians living abroad, investing back home should be fairly straightforward. The markets are familiar, the companies are familiar, and access to information is better than ever. Yet, the moment you start setting up an NRI investment account, the terminology can make the process look more complicated than it is.
NRE, NRO, PIS and Non-PIS are usually the first terms you encounter. More often than not, they are presented as combinations such as NRE PIS and NRO Non-PIS. That is where the confusion begins because these terms are describing different parts of your investment setup.
The simpler way to understand NRI investing is to separate the structure into three layers. Your NRI status tells us how you are classified as an investor. NRE and NRO refer to the bank accounts through which you manage money in India. PIS and Non-PIS refer to the routes through which certain investments are made.
Here is a simpler way to look at it before we go deeper.
| Term | What it refers to | In simple terms | |
|---|---|---|---|
| NRI | Your investor status | You live outside India and invest in India as a non-resident | |
| NRE | Bank account for eligible overseas money | You can bring eligible money earned abroad into India, with funds generally being freely repatriable | |
| NRO | Bank account for eligible money received in India | You can manage income such as rent, dividends and other eligible Indian receipts | |
| PIS | A route for eligible share investments | Your eligible equity transactions are routed and reported through an authorised bank under the applicable framework | |
| Non-PIS | Investing outside the PIS route | Permitted investments are made without using the PIS transaction-routing mechanism |
Non-PIS
Investing outside the PIS route
Permitted investments are made without using the PIS transaction-routing mechanism
A useful way to remember this is to follow the money. First, understand where your money comes from and which bank account it sits in. Then understand which route applies when you invest that money.
NRE and NRO start with where your money comes from
Suppose you live in Dubai. You have ₹10 lakh from your overseas salary that you want to bring into India. At the same time, you own an apartment in Bengaluru that generates ₹40,000 a month in rent.
Both amounts belong to you, but they come from different places. That distinction is important for an NRI.
An NRE account, or Non-Resident External account, is generally used for eligible overseas earnings and funds brought into India. So, your ₹10 lakh of savings from Dubai can be transferred into an NRE account and held in Indian rupees. One of the important characteristics of NRE funds is that they are generally freely repatriable, subject to applicable rules. In simple terms, eligible funds can generally be moved back overseas.
An NRO account, or Non-Resident Ordinary account, is generally used to manage eligible money received in India. In our example, the ₹40,000 monthly rent from your Bengaluru property can be received in an NRO account. Repatriation from an NRO account is subject to applicable limits, taxes, documentation and regulatory requirements.
This is also why an NRI may maintain both accounts. NRE and NRO are not two competing investment products. They are bank accounts serving different purposes based largely on the nature of the money being handled.
PIS is the link between your bank and eligible equity investments
Once the NRE and NRO distinction is clear, PIS becomes easier to understand.
PIS stands for Portfolio Investment Scheme. For an investor, the simplest way to think about it is as a banking-linked route used for eligible NRI investments in listed Indian shares. The authorised bank plays a role in routing and reporting the applicable transactions.
Let us continue with the same Dubai example. You transferred ₹10 lakh of overseas savings into your NRE account. Now you want to use ₹4 lakh from those funds to buy listed Indian shares and retain the applicable repatriation benefit.
In such a setup, an NRE PIS account may be relevant. The NRE part tells you about the bank account and the nature of the money. The PIS part tells you that the eligible equity investment is being made through the PIS framework.
Your FYERS trading account is still where you place the order, and your demat account is where the shares are held after purchase. The PIS bank account sits behind this process and handles the applicable banking and reporting flow. This is the key distinction that can otherwise get lost when all three accounts are explained together.
At FYERS, NRE PIS onboarding is currently supported through HDFC Bank, Axis Bank, Federal Bank and IDFC FIRST Bank. You can understand the transaction flow and current requirements in more detail here.
Non-PIS follows a different investment route
Non-PIS simply refers to permitted NRI investments made outside the PIS transaction-routing mechanism. One structure you will commonly come across is NRO Non-PIS.
Go back to the ₹40,000 monthly rent being received in the NRO account. Over time, suppose you have ₹5 lakh available in that account and want to use ₹2 lakh for permitted investments through the Non-PIS route. In this case, the NRO part tells you which bank account the money comes from, while Non-PIS tells you that the investment is being made outside the PIS route.
That is the distinction to remember. NRE and NRO are about the bank account holding the money. PIS and Non-PIS are about the route through which the applicable investment is made.
You can read more about NRO Non-PIS accounts and how they differ from NRE accounts here.
The bank, trading and demat accounts have separate roles
Once you understand the structure above, the rest of the investing setup is much more familiar. Your bank account is where the money comes from. Your FYERS trading account is where you place buy and sell orders. Your demat account is where the securities you own are held.
For an NRI, these accounts need to be connected in a way that correctly reflects the nature of the funds and the applicable investment route. That is why NRI account opening involves additional banking and documentation requirements compared with a regular resident account.
The bank-linking requirements can also vary depending on the NRI setup. You can check the current requirements for linking banks with an NRI account at FYERS here.
KYC and tax residency complete the account setup
The banking and investment structure is only one part of NRI onboarding. Your KYC and tax-residency information also need to be correctly recorded.
KYC stands for Know Your Customer, and securities-market KYC records are maintained through KYC Registration Agencies, or KRAs. NRIs may also need to provide FATCA and CRS information where applicable. FATCA relates to US tax-compliance reporting, while CRS is an international framework for tax-residency information reporting.
For example, an NRI who is also a US tax resident may need to provide additional FATCA-related information as part of the onboarding process. The practical point is to make sure your residential status, tax residency and supporting documents are accurate and consistent when you apply.
If you are opening or converting to an NRO Non-PIS account, you can check the current document requirements here.
Choosing the right NRI investment structure
When we speak to NRI investors, we believe the right starting point is not to ask whether NRE PIS or NRO Non-PIS is better. These structures exist for different circumstances. Start by understanding your money. If you are investing overseas earnings that you have brought into India and repatriation matters to you, your setup may look different from that of an NRI investing money already received and held in India.
Two NRIs can buy the same stock at the same price on the same exchange through FYERS and still have different banking structures behind those investments. That is because the source and treatment of their money can be different.
Our objective is to make this structure easier to understand because the terminology should not become a barrier to participating in Indian markets. Once you separate the bank account from the investment route, NRE, NRO, PIS and Non-PIS stop looking like four competing account types and start making much more sense.
If you are ready to open an NRI trading and demat account with FYERS, you can see the account-opening process here. You can also browse our complete NRI Knowledge Base here. The exact account structure, eligible securities, taxation, repatriation conditions and documentation depend on applicable regulations and banking arrangements.