Categories of Investments Not Requiring a PIS Account for NRIs
Generally, there are the following 4 categories of investments that require a NON-PIS account for NRI:
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Mutual fund investments – While investing in mutual funds India, the voting right or the ownership of the shares remains with the AMC/trust and not the individual investing in the mutual fund investment by NRI. As a result, reporting is not needed, as these transactions fall under the applicable provisions. NRIs looking to invest in mutual funds or alternative mutual funds don't need to worry about PINS in these cases.
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Bonus or Right issue investments by the company – When a company issues a bonus, it's essentially offering new shares at no cost. It's the company's responsibility to inform the RBI about the shares allotted to NRIs. Since bonus shares are given to all shareholders, the overall percentage of ownership remains unchanged. This rule also applies if an NRI wants to invest in Indian stock market using a bonus share issuance.
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Investing in IPO – Under IPO, The company is responsible for notifying the RBI about the shares allocated to NRIs. As a result, these shares do not fall under the PINS framework. For NRIs wishing to invest in Indian stock market, the company ensures all necessary reporting to the RBI for IPO investments
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Shares bought as resident of India – Shares purchased while being a resident Indian do not grant ownership rights to an NRI as a foreign entity. Therefore, these shares are not covered under PINS. This also affects NRI investment in share market, as the regulations only apply to shares purchased post-commencement of NRI status.
Also Read: Why Us And Canada Nri Face Restrictions On Investments In Mutual Funds In India?