What Is The Difference Between PIS Account And Demat Account

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PIS Account vs. Demat Account: A Comprehensive Guide

Investing in Indian stock markets has become increasingly accessible for both residents and Non-Residential Indians (NRIs). However, the array of different accounts can be confusing. In this blog post, we will explore two such accounts – the Portfolio Investment Scheme (PIS) account and the Demat account, highlighting their differences, instructions for setting them up, points to note, and frequently asked questions.

What Is The Difference Between PIS Account And Demat Account

What is a PIS Account?

The Portfolio Investment Scheme (PIS) is an initiative by the Reserve Bank of India that allows NRIs to invest in Indian shares and convertible debentures of Indian companies on a repatriation or non-repatriation basis. It is a prerequisite for NRIs who wish to invest in Indian stock markets.

What is a Demat Account?

A Demat account, short for dematerialized account, is used to hold, buy, and sell shares in electronic form, eliminating the need for physical share certificates. It is akin to a bank account, where instead of money, securities are held and transactions are recorded.

Differences Between a PIS Account and a Demat Account

While both accounts are essential for NRIs investing in Indian equities, they serve different purposes:

  1. Function: A PIS account is used to route funds for buying and selling shares, while a Demat account is for holding these shares in electronic form.
  2. Regulation: The PIS account is regulated by the RBI, which monitors the investments of NRIs in Indian companies for compliance with prescribed ceilings. In contrast, a Demat account is regulated by the Securities and Exchange Board of India (SEBI).
  3. Requirement: While a Demat account is necessary for anyone looking to trade or invest in Indian securities, a PIS account is specifically required for NRIs.

Instructions for Opening a PIS Account and a Demat Account

For a PIS Account:

  1. Choose a bank registered with RBI for this scheme.
  2. Complete the account opening form, providing personal details and financial information.
  3. Submit necessary documents like passport, visa, overseas address proof, PAN card, and recent photographs.
  4. Once approved, you will receive your PIS account details.

For a Demat Account:

  1. Choose a Depository Participant (DP) – a bank, broker, or financial institution.
  2. Fill out the account opening form.
  3. Submit necessary documents which include proof of identity, proof of address, PAN card, and recent photographs.
  4. Complete In-Person Verification (IPV).
  5. On approval, you will receive your Demat account details.

Points to Note

  • NRIs need both a PIS account and a Demat account to trade in Indian stock markets.
  • The PIS account is linked to an NRE or NRO bank account for routing transactions.
  • The Demat account holds the securities purchased, while the PIS account reflects the transactions.

FAQs

Q: Can I have multiple PIS accounts?

A: No, NRIs can only hold one PIS account at any given time.

Q: Can I have multiple Demat accounts?

A: Yes, there is no restriction on the number of Demat accounts one can hold.

Q: Can a resident Indian have a PIS account?

A: No, PIS accounts are specifically designed for NRIs.

In conclusion, while the PIS account and the Demat account may seem similar, they serve different functions in the process of investing in Indian stocks. Understanding these differences can help streamline your investment process and ensure compliance with regulatory requirements. Always consult with a financial advisor before making any investment decisions.

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