PIS, or Portfolio Investment Scheme, is the RBI-approved route that lets NRIs invest in listed Indian shares through their NRE account, one of two ways to trade Indian stocks from the US. I'll walk you through the account setup, the taxes, and the filing step most guides skip.
Step 1: Confirm you actually qualify
An NRI, for this purpose, is an Indian citizen resident outside India. OCI cardholders can invest too, under the same broad framework.
A handful of RBI provisions do treat OCIs as foreign nationals for other purposes, though. Don't assume every NRI rule applies to you if you hold an OCI card rather than an Indian passport.
What you can't do regardless of status: buy agricultural land, plantation property, or farmhouses as an investment. That's a real restriction, but it has nothing to do with listed equity.
For stocks, the door is open. The restrictions that matter are about how you hold the shares and how much you can move, not whether you're allowed in at all.
Step 2: Open your NRE or NRO account
You can't run this through a savings account you opened before you moved. The moment your residential status changes, RBI rules require you to convert that account or open a new one.
Your choice is an NRE account (rupee account, fully repatriable, tax-free interest in India) or an NRO account (holds India-sourced income, taxable, repatriation capped).
Most NRIs open both. The NRE account funds the fully repatriable route. The NRO account holds anything India-sourced: dividends, rent, or proceeds from shares you already held before you left.
Fund your trading account from the one that matches how you want the money to move later. Switching after the fact means selling and rebuying, not a simple transfer.
Step 3: Decide between a PIS account and Non-PIS, then open your trading account
This is where most guides stop at "open a demat account." They skip the decision that actually matters.
NRIs invest in listed Indian equity through one of two routes, and your bank or broker will ask you to pick.
PIS: funded through your NRE account
PIS (Portfolio Investment Scheme) runs through a designated bank that holds RBI permission on your behalf. It reports every trade against the aggregate ceiling RBI tracks for NRI and OCI holding in a listed company.
It's the route you need if you want your shares funded from, and repatriable through, your NRE account.
Non-PIS: funded through your NRO account
Non-PIS skips that RBI-monitored layer. It's funded from your NRO account, costs less to run, and repatriation still works, just capped at the $1 million a year covered in Step 6.
Several brokers have also widened what a Non-PIS account can do in the last two years, extending it to futures, options, and intraday trades that used to be PIS-only or delivery-only.
Ask your broker directly what their current Non-PIS account permits, rather than assuming the older, narrower rules still apply.
What the regulator calls it now
Every broker and bank still calls these PIS and Non-PIS, and that's the language to use on a call. RBI's own rulebook has quietly moved on.
Its Master Direction on Foreign Investment in India no longer uses the term PIS, framing the same two routes as a repatriation basis and a non-repatriation basis. The mechanics haven't changed, only the label.
Once you've picked, opening the NRI demat account is now largely a document upload: passport copy, PAN, overseas address proof, and a photo.
It's signed digitally in India or couriered back if you're not. Expect one to three weeks, occasionally longer if your bank's PIS permission letter is the slow step.
Step 4: Know what you're allowed to trade
Delivery-based buying and selling of listed shares is open to you without much friction. IPO applications generally work the same way, subject to the same account you've already set up.
Where NRI trading has historically been more restricted is same-day intraday trading and derivatives, both of which sat behind extra requirements for years.
That's loosening, as noted above. But "loosening" is not the same as "identical to a resident account everywhere."
Confirm your specific broker's current terms rather than trading on what a forum post from two years ago said was true.
Step 5: Handle what India withholds before it reaches you
India taxes your capital gain the same way it taxes a resident's, with one difference: as a non-resident, your broker withholds tax at source before you ever see the proceeds.
The tax rates
Short-term gains, on shares held twelve months or less, are taxed at 20% under Section 196 of the Income-tax Act, 2025 (old Section 111A, renumbered from 1 April 2026).
Long-term gains, on shares held more than twelve months, are taxed at 12.5% above a ₹1.25 lakh annual exemption under Section 198 (formerly Section 112A), assuming Securities Transaction Tax was paid, which it is on any ordinary listed-exchange trade.
If an older guide still quotes Section 111A or 112A, the tax hasn't changed, only the citation has. The full breakdown of NRI capital gains rates covers property and other asset classes this guide doesn't.
The cost basis problem I see most often
The catch that costs people real money isn't the rate. It's the cost basis. Your broker calculates the gain, and therefore the withholding, from what its own records show you paid.
If you inherited the shares, transferred them in from a resident demat account before you left India, or bought them years before dematerialization was universal, the broker frequently has no acquisition cost on file.
Without one, it defaults to withholding on the full sale value rather than the gain. On anything but a fresh purchase, that can mean losing 20% of the entire proceeds rather than 20% of what you actually made.
In cross-border filings, this is the single costliest step I see people get wrong, and it's entirely avoidable. The fix has to happen before the trade.
Push your original contract note or transaction statement to the broker ahead of the sale, or file Form 128 with your Assessing Officer for a lower or nil deduction certificate.
That certificate, filed under Section 395, works only looking forward, so it has to be in hand before the broker settles the trade.
A refund through an Indian tax return works too, but it ties up the money for the better part of a year.
Step 6: Report it in the US and move the money home
This is the step every India-only guide skips, and it's the one that actually determines what this costs you.
Direct stocks are not PFICs
Direct Indian stocks are not PFICs. That matters because Indian mutual funds are, and PFIC treatment defaults to a 37% rate plus retroactive interest if you never elect otherwise.
A direct stock avoids that entirely: you report each sale on Form 8949, roll the totals into Schedule D, and apply the ordinary US holding-period rules, same as any other foreign stock.
The Foreign Tax Credit, and what currency does to it
India already taxed the gain through withholding. The US taxes it again, because a US tax resident reports worldwide income regardless of where it was earned.
The DTAA doesn't prevent this. Article 13 lets each country tax capital gains under its own law, and the treaty's savings clause preserves the US's right to tax its own residents as though the treaty didn't exist.
Relief comes from the Foreign Tax Credit on Form 1116, which credits the India tax you paid against your US liability on that income, up to what the US tax would otherwise be.
It doesn't wipe out the US tax if India's rate was lower, and it sits in the passive income basket, separate from any salary-based credit you're also claiming.
Priya, a software engineer in Austin, bought 500 shares of an Indian IT company in 2019 through her resident demat account, back when the rupee traded near 70 to the dollar.
She converted the account to NRI status after moving and sold the shares last year at a healthy rupee profit, paying India's 12.5% on the gain.
The US side surprised her. By the time she sold, the rupee had weakened enough that her dollar-converted proceeds barely cleared her dollar-converted cost basis, leaving a small US capital loss next to a real India capital gain.
Both numbers are correct, just measured in different currencies, and the exchange rate on your purchase and sale dates does real work you won't see until you run the conversion.
FBAR and Form 8938
Two more filings ride along with any Indian brokerage holding. FBAR (FinCEN Form 114) is required once your foreign accounts, demat and brokerage balances included, exceed $10,000 in aggregate at any point in the year, not just at year end.
Form 8938 kicks in at higher thresholds, $50,000 or $75,000 single, $100,000 or $150,000 filing jointly, and can apply to the same account FBAR already covers. Both carry their own penalties for missing them.
Moving the money home
When you're ready to bring the money to the US, an NRO account caps the repatriation at $1 million per financial year. Moving it requires Form 145 (your declaration, formerly Form 15CA).
Above ₹5 lakh in most cases, you'll also need Form 146 (a chartered accountant's certificate, formerly Form 15CB). Money in an NRE account has none of that ceiling.
This is a different mechanism from the Liberalised Remittance Scheme you may have read about. LRS covers India residents sending money out, not you sending your own money home.
Confusing the two is a common way people misjudge how much they can move in a year. The full mechanics are worth reading in how NRIs repatriate funds from India, since the forms and limits there also govern dividends, not only stock proceeds.
Where this actually goes wrong
"It's just a brokerage account, so FBAR doesn't apply."
It does. FBAR counts every foreign financial account, and a demat or trading account is a financial account under the rule, no different from a savings account for this purpose. If your brokerage balance alone, or combined with any other Indian account, ever topped $10,000 during the year, you needed to file.
"I already paid tax in India, so I'm square with the IRS."
The India tax becomes a credit, not a substitute. If India's effective rate on a given gain is lower than the US rate would be, you still owe the difference. The Foreign Tax Credit prevents double taxation. It doesn't guarantee zero additional US tax.
Getting it right the first time
Before you fund your first trade, sit down with a cross-border tax preparer who works both sides of this, not just an Indian CA or just a US preparer alone.
Bring your account statements early enough that they can flag a missing cost basis before a sale, not after a large chunk of your proceeds has already gone to withholding you didn't need to pay.
I'd rather a client bring me a statement I don't end up needing than find out about a missing cost basis after the trade has already settled.
Frequently asked questions
Do I need a PIS account to buy Indian stocks as an NRI in the US?
No, not for every route. PIS is required specifically if you want your investment funded from, and repatriable through, your NRE account.
If you're investing through your NRO account instead, the Non-PIS route works without RBI-monitored PIS permission, though repatriation from that account is capped rather than unlimited.
Are Indian stocks treated as a PFIC on my US tax return?
No. Individual, direct shares of an Indian company are not Passive Foreign Investment Companies, so you skip Form 8621 entirely and report gains on Form 8949 and Schedule D instead.
It's Indian mutual funds, ETFs, and similar pooled vehicles that carry PFIC treatment, not shares you hold directly. Read the full PFIC rules for NRIs if you also hold funds alongside your direct stocks.
Does my Indian demat account count toward the FBAR $10,000 threshold?
Yes. A demat or trading account is a foreign financial account for FBAR purposes, and its balance counts toward the $10,000 aggregate threshold along with every other foreign account you hold, including NRE and NRO accounts.
The full FBAR filing guide for NRIs covers deadlines and what happens if you miss one.
Can NRIs do intraday trading in Indian stocks from the US?
It depends on your account and your broker. Intraday and derivatives trading for NRIs has historically been more restricted than delivery-based investing, but several brokers have widened access to Non-PIS account holders in recent years.
Confirm the current terms with your specific broker before assuming either the old restrictions or the newer flexibility automatically applies to your account.
What happens if my broker doesn't know my original cost basis when I sell inherited or transferred-in shares?
Without a recorded acquisition cost, the broker withholds tax on the full sale value rather than on your actual gain. That can mean losing a much larger share of the proceeds than the tax rate alone suggests.
Fix it before you sell: provide the original contract note or transaction statement, or apply for a lower or nil deduction certificate from your Assessing Officer so withholding is calculated correctly from the start.
Can OCI cardholders invest in Indian stocks the same way as NRIs?
Largely yes, for listed equity investment specifically. The account and trading process is the same.
Where it diverges is elsewhere: OCI cardholders are treated as foreign nationals rather than NRIs under some FEMA provisions unrelated to stock trading. Don't assume every NRI rule automatically extends to you on other fronts.