Zerodha NRI account (non-PIS)

Zerodha NRI account (non-PIS) is a trading and demat account offered by Zerodha to non-resident Indians (NRIs) and Overseas Citizens of India (OCI) cardholders who wish to invest in Indian financial markets without obtaining Portfolio Investment Scheme (PIS) permission from the Reserve Bank of India. The non-PIS route is governed by the Foreign Exchange Management Act, 1999 (FEMA) and the FEMA (Transfer or Issue of Security by a Person Resident Outside India) Regulations, 2017, which distinguish between exchange-traded equity (requiring PIS) and instruments that NRIs may hold without PIS permission.

The non-PIS account at Zerodha is primarily used for mutual fund investments, IPO allotments, and direct holdings of securities that do not require the RBI’s PIS channel. It offers a simpler setup process than the NRI PIS account but is significantly more restricted in the range of instruments that can be actively traded on exchanges.

The PIS vs non-PIS distinction

The Reserve Bank of India’s PIS framework requires NRIs who wish to purchase and sell listed equity shares on Indian stock exchanges to route all such transactions through a designated PIS bank account. The non-PIS route, by contrast, covers:

• Mutual fund units, Direct purchase and redemption through AMCs or platforms such as Zerodha Coin; these are not exchange transactions and do not require PIS.
• IPO allotments, Securities allotted in an initial public offering may be held in an NRI demat account on a non-PIS basis; however, their subsequent sale on the secondary market typically requires PIS routing.
• Rights issues and bonus shares, Received on existing holdings; may be held on non-PIS basis.
• Unlisted equity, Held under separate FEMA provisions and does not go through exchange PIS reporting.

An NRI who holds securities on a non-PIS basis and subsequently wishes to sell them on NSE or BSE must either obtain PIS permission before selling, or sell through the off-market transfer mechanism. This is a significant operational constraint and is a common source of compliance error for NRIs who underestimate the scope of the PIS requirement.

Eligibility

The non-PIS account is available to:

• NRIs (Indian citizens residing outside India) who hold an NRO savings account and do not wish to obtain PIS permission.
• OCI cardholders on the same terms as NRIs.
• NRIs who already hold a PIS account and wish to hold certain instruments separately on a non-PIS basis (dual-account structure).

Persons of Pakistani or Bangladeshi nationality or origin require prior RBI approval for equity investment in India and typically cannot open either a PIS or non-PIS account without specific clearance.

Regulatory wrapper

The key regulatory distinction is that mutual fund units and certain other securities fall under Schedule 5 of the FEMA (Transfer or Issue of Security) Regulations, which does not require PIS. The non-PIS account is structured around these Schedule 5 instruments.

SEBI’s regulations on stock brokers and depositories apply to Zerodha’s role in the non-PIS account in the same manner as the PIS account.

Documentation required

The documentation for a non-PIS account is less burdensome than for a PIS account, primarily because no PIS permission letter is required:

No income proof is required for mutual fund investments. For IPO applications, the bank account proof is sufficient.

KYC process

As with the NRI PIS account, Zerodha’s eKYC process (Aadhaar OTP-based) is not available for NRI accounts because NRIs frequently do not have an Aadhaar-linked mobile number accessible from abroad. The account-opening process is either physical (document courier to Bengaluru) or Video Customer Identification Process (V-CIP), where a Zerodha representative conducts a live video call for identification and verification.

Documents must be:

• Self-attested if submitted with V-CIP; or
• Notarised in the country of residence, or attested by the Indian Embassy/High Commission, or attested by a scheduled bank branch in the country of residence, if submitted physically.

Segments and instruments available

The effective investment universe for a standalone non-PIS NRI account is mutual funds, IPO participation (hold only), and unlisted securities. For active equity trading, the NRI must use the PIS route.

Account opening fees and charges

Tax treatment

NRIs holding investments through the non-PIS (NRO) route are subject to Indian taxation on income arising from those investments:

Mutual fund capital gains

TDS on mutual fund redemptions, AMCs deduct TDS at 20 per cent (plus applicable surcharge and cess) on STCG and 12.5 per cent on LTCG at the time of redemption for NRI unit holders. The NRI may claim a refund on filing an Indian income tax return if the actual liability is lower.

Dividend income

Dividends from Indian companies and mutual fund distributions are subject to TDS at 20 per cent under section 196A of the Income Tax Act, 1961. DTAA benefits may reduce this rate to 5–15 per cent depending on the treaty.

Repatriation from NRO account

Funds in the NRO account (including redemption proceeds and dividends) may be repatriated up to USD 1 million per financial year after payment of applicable Indian taxes. Repatriation requires a CA certificate in Form 15CA/15CB confirming that taxes have been paid or are not due.

Mutual fund investment, the primary use case

The non-PIS NRI account’s most practical application at Zerodha is investment in direct plans of SEBI-registered mutual funds through Zerodha Coin. Key operational details:

Fund selection

Not all Indian mutual funds accept NRI investments. The eligibility depends on the AMC’s compliance posture with the Foreign Account Tax Compliance Act (FATCA) and the Common Reporting Standard (CRS). Most major Indian AMCs (HDFC MF, ICICI Prudential MF, SBI MF, Axis MF, Mirae Asset MF) accept NRI investments. A subset of AMCs, particularly those with US-regulated custodians or distributors, restrict investments from NRIs resident in the United States and Canada due to the registration requirements of the US Investment Advisers Act and the US Securities Act.

Zerodha’s Coin platform displays AMC-level NRI eligibility for each fund, enabling the investor to filter applicable schemes.

Mandate and SIP

Systematic Investment Plan (SIP) mandates for non-PIS NRI accounts must be executed via NACH (National Automated Clearing House) linked to the NRO bank account. The SIP mandate is registered with the bank and debited on the SIP date each month. UPI-based SIP mandates are not available for NRO accounts as UPI is restricted to resident savings accounts.

Redemption and taxation

Redemption proceeds from mutual funds are credited to the NRO bank account linked to the Zerodha account. The AMC deducts TDS at the applicable rate before crediting. The net proceeds (after TDS) are available in the NRO account; repatriation from NRO to a foreign account is subject to the USD 1 million per year limit and Form 15CA/15CB requirements.

IPO participation via non-PIS account

NRIs holding a non-PIS account at Zerodha may apply for IPOs through the bank-based ASBA mechanism. The process:

1. The NRI selects the IPO on Zerodha’s platform or the bank’s net banking portal.
2. The bid amount is blocked in the NRO (or NRE) bank account by the bank.
3. On allotment, the allotted amount is debited and unblocked amounts are released.
4. Allotted shares are credited to the non-PIS NRI demat account with Zerodha.

UPI ASBA is not available to NRI applicants, as UPI handles are linked to resident savings accounts and NRO/NRE accounts are not UPI-eligible under current NPCI guidelines.

Post-allotment, the NRI holds the IPO shares in their non-PIS demat account. As discussed above, the subsequent secondary-market sale of these shares is a compliance-sensitive area and typically requires PIS permission to be obtained before any exchange-based sale.

FATCA and CRS compliance

All NRI account holders at Zerodha are required to provide a FATCA/CRS self-certification at the time of account opening and to update it when their tax residency or controlling person status changes. The self-certification captures:

• Country of tax residency.
• Foreign tax identification number (TIN) in the country of residence.
• US person status (for FATCA purposes).

Zerodha, as a Reporting Financial Institution under the Income Tax (Automatic Exchange of Information) Rules, 2015, reports NRI account details to the Indian income tax department, which shares them with treaty partner tax authorities under the CRS framework. NRIs who are tax residents of countries that have signed the Multilateral Competent Authority Agreement with India may have their Indian financial account details disclosed to their country of residence’s tax authority.

Key operational consideration: the PIS trap

A recurring compliance issue for NRIs is the inadvertent violation of the PIS requirement when selling securities received on a non-PIS basis (such as IPO allotments or bonus shares) through the secondary market without PIS permission. Under FEMA, such sales without PIS routing constitute a technical violation. Zerodha’s NRI team advises clients to obtain PIS permission before any secondary-market sale of equity shares, regardless of how the shares were originally acquired.

Zerodha Console and reporting for non-PIS NRI accounts

Zerodha Console provides the same suite of reporting tools for non-PIS NRI accounts as for resident accounts:

• Capital gains statements, Downloadable by financial year, showing acquisition cost, sale proceeds, holding period, and gain or loss for each transaction. These statements are formatted for direct use in the income tax return filing, with gains segregated by STCG and LTCG.
• Mutual fund transaction history, Complete transaction history for Coin-based mutual fund investments.
• Tax P&L report, A combined profit and loss statement covering all instruments held in the account.
• Holding statement, Real-time and end-of-day demat holding statements downloadable as a PDF or CSV.

Because TDS is deducted at source on mutual fund redemptions and dividends for NRI accounts, the capital gains statement from Console must be reconciled against the TDS certificates (Form 16A) issued by the AMC or company before filing the Indian income tax return.

Filing the Indian income tax return

An NRI is required to file an Indian income tax return (ITR-2 or ITR-3 depending on the nature of income) if their Indian-sourced income exceeds the basic exemption limit (INR 3 lakh under the new regime for AY 2024-25 onwards). Even if income is below the exemption limit, filing a return is advisable to:

• Claim TDS refunds (where TDS deducted exceeds actual tax liability).
• Establish a record of capital gains for carry-forward of losses.
• Comply with FEMA repatriation documentation requirements that often cite the income tax return.

Zerodha provides NRI clients with a tax P&L report from Console that can be handed to a Chartered Accountant for return preparation. The return must be filed using the NRI’s Indian PAN and the Indian income tax e-filing portal (incometax.gov.in).

Comparison with PIS account

References

1. Foreign Exchange Management Act, 1999, sections 6 and 47.
2. FEMA (Transfer or Issue of Security by a Person Resident Outside India) Regulations, 2017, Schedules 3 and 5.
3. RBI Master Direction on Non-Resident Indians (NRI) Investments in India.
4. Income Tax Act, 1961, sections 115D–115I, 196A.
5. SEBI (Stock Brokers and Sub-brokers) Regulations, 1992.
6. SEBI Master Circular on KYC, SEBI/HO/MIRSD/MIRSD-PoD-1/P/CIR/2023/37, dated 8 March 2023.
7. RBI AP (DIR Series) Circular No. 11 (2016-17) on FEMA Schedule 5 mutual fund investments.