NRE PMS account

An NRI investing in a PMS in India must choose how the money flows in and out of the country, and that choice is made through the type of bank account behind the investment. An NRE PMS account is the repatriable route: it allows repatriation of funds back to the foreign country.

This sits alongside the NRO PMS account, the non-repatriable route, as the two ways NRIs can invest in PMS under the Portfolio Investment Scheme, the RBI facility that lets NRIs and OCIs invest in the Indian stock market through a designated bank account.

Where it sits (Chapter 11, section 11.5). NRIs investing in PMS under PIS choose between two investment routes:

Compliance requirements common to both. The NRI must open the account with a designated bank, invest only through RBI-approved PMS providers registered under the SEBI (Portfolio Managers) Regulations, 2020, and cannot engage in intraday trading or short-selling.

PIS approval is not required for PMS itself, which the workbook notes as an advantage. PIS approval is necessary for direct stock trading by an NRI, but not for PMS, because the portfolio manager, not the NRI, makes the investment decisions in a discretionary or non-discretionary arrangement.

Rajiv, an NRI settled in Singapore, wants to invest ₹75,00,000 in an Indian discretionary PMS and eventually bring the proceeds back to Singapore when he sells.

He opens an NRE PMS account, routing his funds through it specifically because it is the repatriable route. When his PMS mandate is later redeemed for, say, ₹92,00,000, he can transfer that amount, capital and gains, back to his Singapore bank account, without the non-repatriation restriction that would apply had he invested through an NRO account instead.

Compare this to his cousin Meena, also an NRI, who invests through an NRO PMS account for a separate mandate. Her gains and capital must stay within India, available for use here, for example, to fund a property purchase in India, but not to be freely sent abroad.

Chapter 11 (Taxation), section 11.5.3 (Structure of NRI Investments in PMS), sets out the NRE and NRO distinction as the two investment routes NRIs choose between. Expect a question matching repatriable to NRE and non-repatriable to NRO, and a question on the compliance requirements common to both, designated bank, RBI-approved provider, no intraday trading or short-selling.

• NRE means repatriable, funds can go back abroad; NRO means non-repatriable, funds stay in India. The letters themselves are the memory aid; do not reverse them.
• PIS approval is not required for PMS, even though PIS is the RBI facility that also covers direct NRI stock trading, which does need PIS approval.
• NRIs cannot do intraday trading or short-selling through either PMS account type.
• The workbook's section 11.5.3 prints older capital-gains rates for NRIs (STCG 15%, LTCG 10% over ₹1 lakh), while the main taxation table elsewhere in the chapter gives STCG at 20% and LTCG at 12.5% above ₹1.25 lakh, a stale-figure divergence within the same workbook. State both figures when the question concerns NRI PMS taxation specifically, since section 11.5.3 is where the older figures are printed.