Question 1

Can NRIs buy stocks in India?

Accepted Answer

Yes. NRIs can buy and sell shares on NSE and BSE through the RBI's Portfolio Investment Scheme (PIS). You need: (1) RBI PIS permission obtained through your designated bank, (2) a single designated demat account with a SEBI-registered broker, and (3) a linked NRE or NRO account for settlement. Without PIS permission, you cannot trade on Indian exchanges. The single-company holding limit is 5% of paid-up capital (10% with board approval), and the aggregate NRI limit per company is typically 10% (can be raised to 24% by the company's board).

Question 2

What is the Portfolio Investment Scheme (PIS)?

Accepted Answer

PIS is an RBI scheme under FEMA regulations that allows NRIs to buy and sell shares and convertible debentures on Indian stock exchanges. Your designated authorized dealer bank (the one holding your NRE/NRO account) applies to the RBI on your behalf. The application involves submitting Form RBI/PIS along with NRI proof documents. Approval typically takes 2-4 weeks. Once approved, you can only trade through one designated demat account linked to that PIS permission. You cannot have multiple PIS accounts.

Question 3

Are Indian mutual funds PFICs for US tax purposes?

Accepted Answer

Yes, every Indian mutual fund (equity, debt, hybrid, ELSS, liquid, index) is classified as a Passive Foreign Investment Company (PFIC) under IRC Sections 1291-1298. This applies to all US tax residents: US citizens, green card holders, and H1B/L1 visa holders who meet the substantial presence test. PFIC gains are taxed at up to 37% plus an interest charge, and you must file Form 8621 for each fund annually. For new investments, use US-listed India ETFs (INDA, EPI, SMIN) instead.

Question 4

Can NRIs buy agricultural land in India?

Accepted Answer

No. NRIs and OCI cardholders are explicitly prohibited from purchasing agricultural land, plantation property, or farmhouses in India under FEMA Section 6(3)(i) and the Foreign Exchange Management (Non-debt Instruments) Rules, 2019. The only way an NRI can hold agricultural land is through inheritance or gift from a person resident in India. This prohibition applies regardless of your citizenship status. Even an Indian citizen living abroad as an NRI cannot buy farmland.

Question 5

Can NRIs invest in the National Pension System (NPS)?

Accepted Answer

Yes. NRIs can open and contribute to NPS accounts under PFRDA (Pension Fund Regulatory and Development Authority) guidelines. Contributions can be made from NRE or NRO accounts. NPS offers two tiers: Tier I (mandatory, locked until age 60, minimum 40% annuity on maturity) and Tier II (voluntary, flexible withdrawals). On maturity, the lump sum withdrawal portion follows RBI repatriation rules. Note: if you renounce Indian citizenship, you must close the NPS account as NPS is available only to Indian citizens and OCI holders.

Question 6

What happens to my PPF account when I become an NRI?

Accepted Answer

If you had a PPF account before becoming an NRI, you can continue it until the original 15-year maturity date. You can keep contributing during this period. However, you cannot open a new PPF account as an NRI, and once your existing account matures, you cannot extend it for another 5-year block. The account will earn interest at the prevailing rate until maturity. After maturity, the account earns no interest and must be closed. This is per FEMA notification and the PPF Scheme rules. Some post offices and banks may not enforce this strictly, but technically the rule is clear.

Question 7

Can NRIs open a demat account in India?

Accepted Answer

Yes, but it must be a designated NRI demat account (PIS account) linked to your NRE or NRO bank account. You cannot use a regular resident demat account. Brokers like ICICI Direct, HDFC Securities, Axis Direct, and Kotak Securities offer NRI demat accounts. You need to complete KYC with NRI-specific documents (passport, visa, overseas address proof). If you had a resident demat account before becoming an NRI, you must convert it to an NRI demat account by informing your depository participant. Failing to convert is a FEMA violation.

Question 8

What FBAR and FATCA reporting is required for Indian investments?

Accepted Answer

FBAR (FinCEN 114): if the aggregate value of all your foreign financial accounts (bank, demat, mutual fund) exceeds $10,000 at any point during the year, you must file electronically by April 15 (auto-extended to October 15). Penalty: $10,000 per account per year for non-willful violations. FATCA (Form 8938): if specified foreign assets exceed $50,000 on December 31 or $75,000 at any point (single), or $100,000/$150,000 (married filing jointly), file with your tax return. Schedule B Part III: disclose foreign account existence regardless of balance. These apply to all US tax residents holding any Indian financial account.

Question 9

Can OCI (Overseas Citizen of India) cardholders invest in India?

Accepted Answer

Yes. OCI cardholders have largely the same investment rights as NRIs under FEMA. They can invest in stocks (via PIS), mutual funds, real estate (residential and commercial), fixed deposits, NPS, and government bonds. The same prohibition on agricultural land, plantation, and farmhouse applies. OCI holders who are US tax residents face identical PFIC, FBAR, and FATCA obligations. The key difference: OCI holders who never held Indian citizenship may need additional documentation for some investments. Also, NPS is available to OCI holders under current PFRDA rules.

Question 10

What is the difference between repatriable and non-repatriable investments?

Accepted Answer

Repatriable investments allow you to transfer the principal and returns back to your country of residence in foreign currency. Non-repatriable investments keep the funds in India. NRE account investments (stocks via NRE-linked demat, NRE FDs, FCNR FDs) are fully repatriable without limit. NRO account investments have a repatriation cap of $1 million per financial year (after paying applicable taxes) under the RBI's Liberalised Remittance Scheme rules for NRO accounts. To repatriate NRO funds, you need a CA certificate (Form 15CB) confirming taxes are paid and a Form 15CA filing. For large property sales, repatriation may require multiple years if proceeds exceed $1M.

India Investment Eligibility Checker: Frequently Asked Questions