What the Portfolio Investment Scheme actually is
It is the route the Reserve Bank runs for a person living outside India to buy and sell shares of listed Indian companies on a recognised stock exchange. Everything goes through one designated branch of one authorised dealer bank. That branch settles your trades against a single rupee account kept for nothing else, and reports the purchases and transfers to the RBI.
The rulebook never uses the words Portfolio Investment Scheme. What you are actually signing up to is Schedule III of the Foreign Exchange Management (Non-debt Instruments) Rules 2019. The RBI's own market-monitoring pages and every bank in the country still call it PIS, so the vocabulary you meet at the counter and the vocabulary in the law do not match.
Two things moved in June 2026. The Third Amendment Rules, notified on 12 June 2026, opened Schedule III beyond NRIs and OCI cardholders to any individual person resident outside India, and raised the caps. A day later the payment and reporting regulations were amended to require a single designated repatriable rupee account used exclusively for these investments, and to replace the old Form LEC (NRI) with Form LEC (IFI), for Individual Foreign Investor.
What PIS is not: it is not a tax scheme, and it is not how you buy mutual funds.
Repatriable or not: the route decides everything
There are two ways to own listed Indian shares from abroad, and they are separate FEMA pools rather than two flavours of the same account. The tax is identical. The exit is not.
| Repatriation basis (Schedule III, PIS) | Non-repatriation basis (Schedule IV, no PIS) | |
|---|---|---|
| What funds it | Inward remittance, or a designated repatriable rupee account, usually NRE | Any of your accounts, NRO, NRE or FCNR(B); what is fixed is the exit, through NRO |
| PIS permission | Yes, from one designated bank branch | No |
| Can the money leave India | Yes, freely | Only inside the USD 1 million per financial year NRO route |
| Tax on gains | 20 percent short-term, 12.5 percent long-term over the ₹1.25 lakh yearly exemption, plus cess and surcharge | Identical |
| Who withholds | The designated bank, before it credits the proceeds | Your broker or bank, before it credits the proceeds |
| What FEMA calls it | Foreign investment | Domestic investment, at par with a resident's |
The last row is the one that surprises people. Money you put in on a non-repatriation basis is treated as domestic investment, which is why the paperwork is lighter. The price of that lightness is the exit: it leaves India only through the NRO remittance route, capped at USD 1 million a financial year across all your assets.
The company caps below apply to the repatriable route only. Non-repatriation purchases sit under Schedule IV of the NDI Rules, are treated as domestic investment, and carry no cap of their own.
Setting up the repatriable route, in order
The sequence matters, because each step is the prerequisite for the next and brokers will not open the trading account until the bank side is done.
1. PAN, active. Nothing else starts without it. 2. An NRE account at the branch you are choosing as your designated branch. You may appoint only one bank for this. 3. The PIS permission letter from that bank. Your broker and the clearing side check trades against it. 4. The linked NRI demat and trading account, opened against the same bank and permission.
Then keep it clean. The designated account is for Schedule III trades and nothing else. IPO application money, mutual fund purchases, loan instalments and ordinary banking belong in a different account, and mixing them is the commonest reason a bank freezes a PIS mandate while it works out which credit was what.
If you already hold a resident demat from before you moved, do not try to convert it into this. That is a separate job with its own sequence, and it is set out in full on still trading on a resident demat after moving abroad.
What does not need PIS at all
Most of what an ordinary investor does is outside this scheme, which is why your friend has been investing for years without a permission letter.
Mutual funds. Units are bought from the fund house, not on a stock exchange, so Schedule III does not reach them. An NRE or NRO account and completed KYC is the whole requirement.
IPOs, rights and bonus shares. The primary market sits outside PIS. Application money can go from a normal NRE or NRO account, and selling those shares later does not need PIS permission either.
Anything bought on a non-repatriation basis. That runs under Schedule IV; the proceeds exit only through NRO.
Shares you bought while you were still resident. They stay on the non-repatriable side, move into an NRO-linked demat, and are sold without PIS.
Futures, options and intraday. These are not on the PIS route at all; they run on rupee funds on a non-repatriation basis. How India then taxes those gains is a different question, and a harsher one, covered at futures and options as business income.
If you are still working out which deposit account should be feeding any of this, FCNR vs NRE vs NRO sets the three side by side.
The caps, and the list your bank checks before it buys
Two ceilings sit on top of every purchase, and both moved in June 2026.
| Cap | Until 12 June 2026 | Now |
|---|---|---|
| One individual, in one company | 5 percent of paid-up equity capital | Less than 10 percent, on a fully diluted basis |
| All individual foreign investors together | 10 percent, raisable to 24 percent by special resolution | 24 percent, no resolution needed |
Your own limit is measured across both routes together, so repatriable and non-repatriable holdings in the same company are added up. Cross the individual line and you have five trading days from the date of settlement to sell down; miss that and your entire holding in that company is treated as foreign direct investment, with the approvals and pricing rules that brings.
The aggregate ceiling is not something you track. The RBI does, and it stops you before you breach it. Once purchases in a company reach a cut-off two percentage points below the ceiling, the RBI cautions every designated bank branch, and further buying needs its prior approval, given first come first served. On reaching the ceiling itself, branches are told to stop buying for non-resident clients altogether. That is why the order goes through your designated branch rather than straight to the exchange.
A worked example: Meera in London opens the repatriable route
Meera has been in London for six years and wants to put GBP savings into Indian listed equity that she can bring back out later without a cap. Repatriable is the only route that does that, so she opens it in order: PAN first, then an NRE account at one branch she nominates as her designated branch, then the PIS permission letter, then the linked demat and trading account against the same bank.
She remits funds into that NRE account and buys ₹12,00,000 of listed shares; most of it she still holds. Fourteen months later she sells one holding for ₹8,00,000 that had cost her ₹5,00,000, a long-term gain of ₹3,00,000.
Her designated bank withholds before it credits her. At 12.5 percent plus 4 percent cess on the ₹3,00,000, that is ₹39,000, and ₹7,61,000 lands in the NRE account, freely repatriable from the moment it arrives.
The return is where she gets part of it back. Across the year her long-term equity gains attract the ₹1,25,000 annual exemption, so the tax actually due is 12.5 percent of ₹1,75,000, which is ₹21,875, plus ₹875 cess, ₹22,750 in all. She files and claims the ₹16,250 difference as a refund. Whether a bank applies that exemption at source varies; the return is what settles it either way.