NRO PMS account

The NRE PMS account lets an NRI send PMS proceeds back abroad. The NRO PMS account is the other route: non-repatriable, so gains and capital remain within India and are subject to Indian taxation.

Both are ways an NRI invests in PMS under the Portfolio Investment Scheme, and the choice between them decides whether the money the PMS earns can ever leave the country, not how it is invested once inside the account.

The distinction (Chapter 11, section 11.5.3).

Shared compliance requirements. Whichever route an NRI chooses, the account must be opened with a designated bank, investment must go through RBI-approved PMS providers under the SEBI (Portfolio Managers) Regulations, 2020, and the NRI cannot engage in intraday trading or short-selling.

Interest is taxed differently from gains. The workbook specifically flags that interest earned on NRO accounts is taxable at 30% (plus cess and surcharge), a materially higher rate than the capital gains rates that apply to the underlying PMS investments themselves.

Meena, an NRI based in Dubai, opens an NRO PMS account for a ₹50,00,000 discretionary mandate, intending to use any proceeds for a future property purchase within India rather than to bring the money abroad.

Her account earns ₹1,20,000 of interest on idle cash balances during the year, alongside capital gains on her equity holdings. The interest is taxed at 30% plus cess and surcharge, roughly ₹36,000 or more, a materially different, and higher, treatment from her equity capital gains, which follow the ordinary STCG or LTCG rates.

Because her account is NRO, all of this, both the interest and any capital gains, stays within India, whatever her personal reasons for choosing this route. Had she instead wanted to eventually move the proceeds to Dubai, she would have needed an NRE PMS account from the outset, not an NRO one.

Chapter 11 (Taxation), section 11.5.3, sets out the NRO route alongside NRE, and separately states the 30%-plus-cess rate on NRO account interest. Expect a question on which route keeps funds non-repatriable, NRO, and a question isolating the interest tax rate specific to NRO accounts.

• NRO means non-repatriable; funds and gains cannot leave India through this account.
• Interest on NRO accounts is taxed at 30% plus cess and surcharge, a specific, higher figure the workbook states, distinct from capital gains rates on the PMS investments themselves.
• The choice between NRE and NRO is about the bank account and repatriation, not about which securities the PMS can hold. Both routes invest through the same PMS mandate structure.
• NRIs cannot do intraday trading or short-selling through an NRO PMS account, the same restriction that applies to NRE.