The NRI or the PIO has to approach a bank to open such an account and all sale and purchase transactions are routed through this account.
This helps companies and the authorities to track NRI holdings in a particular company. It's important to remember that once you are an NRI, you should take steps to ensure that you do not trade through your domestic account to buy and sell shares and must have a PIS account.
The following things must also be taken into account
1) A Non Resident Indian or a PIO can purchase shares only up to five per cent of the paid up capital of an Indian company. All NRIs/PIOs taken together cannot purchase more than 10 per cent of the paid up value of the company.
2) The sale proceeds of the repatriable investments can be credited to the NRE/ NRO, etc. accounts of the NRI/ PIO, whereas the sale proceeds of non-repatriable investment can be credited only to NRO accounts.
3) The sale of shares will be subject to payment of applicable taxes.
Banks on behalf of RBI issue PIS permission to NRIs and PIOs and also report any mandatory reporting that might be necessary. The PIS may be held under repatriation or non-repatriation basis in respect of shares or convertible debentures sold or purchased through a registered stock broker on a recognised stock exchange.