1. Definition of NRI
An Indian citizen, including a person of Indian origin (PIO), residing outside the country who has spent at least 182 days in India in a financial year.
A PIO includes a person
Who has at any time held an Indian passport
Who is a grandchild of Indian citizens
Is a spouse of an Indian citizen
Is a spouse of a person covered in the first two points
NRIs investments are regulated by the RBI

2. Source of Funds
The source of funds from which the NRI makes the investment has to be ascertained
Rupee not convertible on capital account
Investments made out of earnings outside the country cannot be repatriated i.e taken out of the country on sale/redemption/maturity
Repatriation depends on source of funds
Source of funds determined by the bank account from which the investment is made

3. Types of NRI Bank Accounts - I
Non-resident ordinary (NRO) account
Savings/current/term deposit
Can deposit foreign currency or Indian rupee
Funds not repatriable
Resident Indians can be joint holders
Non-resident external (NRE) account
Savings current/current/term deposit
Can deposit any foreign currency
Funds can be repatriable
Only NRIs can be joint holders

4. Types of NRI Bank Accounts - II
Foreign currency non-resident (FCNR) account
Term deposit
Can deposit five specified currency
Funds are repatriable
Only NRIs can be joint holders

5. Permitted Investments for NRIs
NRIs do not require specific permission of RBI to make investments
Investments that can be made on repatriable or non-repatriable basis include
Gsecs
Mutual fund units
Shares and bonds of PSUs
Bonds of banks and private companies
Shares and debentures held under PIS
Immovable property
Investments only on non-repatriable basis include
Commercial paper and deposit with companies and
Shares and debentures other than under the PIS

6. Portfolio Investment Schemes (PIS)
Investments in the secondary markets by NRIs may be done only through the PIS
Limit of 5% of the paid-up value of shares and convertible debentures of the company for each NRI
Limit of 10% for all NRI investments in the above securities. Some companies have raised the limit to 24%.
Only delivery-based transactions are allowed under the PIS
Investments made prior to becoming an NRI does not form part of the PIS

7. PIS- Operational Aspects
A PIS account- NRO or NRE may be opened with a designated branch of a bank
Details of the broking and demat account through which trades will be done and settled has to be given to the bank
The demat account may be held with the same bank or the investor may undertake to provide fortnightly statements of transactions to the bank
The bank makes fortnightly disclosures to the RBI on each NRI’s holding
An NRI can have only one PIS account. They may change the bank with which they have the account.
A PIS account may have up to four joint holders

8. Tax Implications of Investments
Interest earned on NRE and FCNR accounts are completely tax-free
Dividends are exempt from tax
Short-term and long-term capital gains are subject to tax deduction at source at the time of redemption/sale
15% for short-term capital gains from equity-oriented funds. Long-term gains are exempt from tax
30% for short-term gains from other funds. Long-term gains are charged at 20%.
NRIs can benefit from DTAA entered into with countries
Need to provide residency certificate