Banking, Investing & Taxation for NRIs (2026)

The Complete Guide to NRE, NRO, FCNR, PIS vs Non-PIS, and SOA Mode (2026)

For NRIs, financial outcomes in India depend less on product selection and more on correct banking structure, regulatory compliance, and tax treatment.
Misunderstanding NRE, NRO, FCNR, or PIS rules often leads to excess tax, blocked repatriation, and operational friction.

This all-in-one guide covers:

• NRE vs NRO vs FCNR accounts

• Uses and taxation of each

• Repatriation rules

• PIS vs Non-PIS investing

• SOA mode for mutual funds

• A clear banking + investing decision flow

• SEO-optimized FAQs

Who This Guide Is For

This guide applies if you:

• Are an NRI or OCI

• Earn income outside India

• Maintain bank accounts in India

• Invest or plan to invest in Indian assets

• Want compliant, tax-efficient structures

NRE, NRO, and FCNR Accounts Explained

1. NRE Account (Non-Resident External)

Purpose
To park foreign income remitted to India.

Key Characteristics

• Maintained in INR

• Funded only by foreign income

• Fully repatriable (principal and interest)

Taxation

• Interest is fully tax-free in India

• No TDS applies

Best Used For

• Investing in Indian mutual funds and equities

• Long-term wealth building in India

• Easy repatriation of funds

2. NRO Account (Non-Resident Ordinary)

Purpose
To manage income earned in India.

Examples

• Rental income

• Pension

• Dividends

• Sale proceeds of Indian assets

Key Characteristics

• Maintained in INR

• Used only for India-sourced income

Taxation

• Interest is taxable in India

• TDS typically at 30% + surcharge + cess

Repatriation

• Limited to USD 1 million per financial year

• Requires Form 15CA and Form 15CB

3. FCNR Account (Foreign Currency Non-Resident)

Purpose
To hold foreign income in foreign currency without INR conversion.

Key Characteristics

• Maintained as fixed deposits only

• Denominated in USD, GBP, EUR, etc.

• No exchange-rate risk

• Fully repatriable

Taxation

• Interest is tax-free in India

• No TDS applies

Best Used For

• Hedging against INR depreciation

• Parking surplus foreign income

• Short- to medium-term capital protection

Comparison: NRE vs NRO vs FCNR

Step 1: Banking Foundation for Investing

• Use NRE for investments wherever possible

• Use NRO strictly for India-sourced income

• Use FCNR to manage currency risk on foreign income

Correct segregation simplifies taxation and repatriation.

Step 2: What Are You Investing In?

NRIs typically invest in:

1. Indian mutual funds

2. Indian listed shares (direct equity)

The regulatory treatment for these two asset classes differs materially.

PIS vs Non-PIS Investing

What Is PIS?

PIS (Portfolio Investment Scheme) is an RBI-regulated mechanism that allows NRIs to invest in Indian listed shares directly.

Under PIS:

• Every trade is reported to RBI

• Investment limits are monitored by a designated bank

• Demat, trading, and bank accounts are tightly linked

PIS applies only to direct equity shares.
It does not apply to mutual funds.

How Many PIS Accounts Can an NRI Have?

An NRI is permitted to maintain only one active PIS account at any given time across all banks.

Implications:

• All PIS trades must route through one designated bank

• Multiple PIS accounts are not permitted

• Changing banks requires closure of the existing PIS approval

This restriction is a key source of operational complexity.

Why the PIS Process Is Complex

Common challenges include:

• Dependence on a single bank

• Restricted broker choice

• Trade settlement delays

• Reconciliation issues

• RBI investment cap monitoring

• Corporate action mismatches

• Difficulty switching banks

• Additional bank charges

Non-PIS Investing Explained

Non-PIS investing refers to NRI investments that fall outside the PIS framework.

Key points:

• Mutual funds do not require PIS

• No RBI trade reporting

• Lower operational dependency on banks

SOA Mode: Investing Without PIS or Demat

What Is SOA Mode?

SOA (Statement of Account) mode means mutual fund units are held directly with the AMC or registrar, without a Demat account.

Why SOA Mode Works Well for NRIs

• No PIS required

• No Demat account required

• No RBI reporting

• Lower operational friction

• Simpler taxation and repatriation

• Clean ownership records

SOA mode is regulator-approved and widely used for NRI mutual fund investing.

Banking + Investing Decision Flow

Taxation Overview for NRIs

Bank Interest

• NRE interest: Tax-free

• FCNR interest: Tax-free

• NRO interest: Taxable with TDS

Investments

• Mutual funds: TDS applies at source

• Direct equity: Capital gains tax applies

• Tax treaties may offer relief based on country of residence

Summary: Best-Practice Structure for Most NRIs

• Banking: NRE + NRO (and FCNR where relevant)

• Investing: Mutual funds via SOA mode

• PIS: Only if direct equity exposure is required

This setup minimizes tax friction and compliance risk.

FAQs

Is interest on FCNR accounts taxable in India?

No. Interest on FCNR deposits is tax-free for NRIs.

Can NRIs freely repatriate money from India?

Yes, from NRE and FCNR accounts. NRO repatriation is capped at USD 1 million per year.

Is PIS mandatory for NRIs?

PIS is mandatory only for direct equity investments in Indian listed shares.

Can NRIs invest in mutual funds without Demat?

Yes. Mutual funds can be held in SOA mode without Demat or PIS.

How many PIS accounts can an NRI have?

Only one active PIS account across all banks.

Does LRS apply to NRIs?

No. LRS applies only to resident Indians.

Final Takeaway

For NRIs, clean banking structure and the right investment mode matter more than product selection.
Using NRE and FCNR accounts appropriately, avoiding unnecessary PIS complexity, and investing via SOA mode creates a compliant, tax-efficient foundation for long-term wealth in India.