UPDATED: NRI Not Eligible For Indian PPF & NSC Accounts

UPDATED: Per a recent memo released by the Department of Economic Affairs, all NRIs who owned PPF accounts before changing residential status will be allowed to run its course of the PPF maturity date. This, however can still not be renewed or extended if the account holder has a NRI status. Previously, it was announced in the official gazette of the Indian Government that Public Provident Funds (PPF) and National Savings Certificates (NSC) owned by Non-Resident Indians will face immediate closure. This will be irrespective of the maturity date of the scheme. These accounts for NRIs will earn the post office savings account rate of 4% till the date of becoming a non-resident and not the higher interest rates as in when the account holder was a resident. For all others residents, interest rates on small savings schemes are calibrated on a quarterly basis and for the months of October-December it is kept at 7.8% for both PPF and NSC.

The NSC is deemed to be encashed the day the account holder converts to being a NRI and interest will be paid accordingly.

Evidently, the interest rates for each of these schemes is a determining factor in whether one should continue it or not. Although NRIs are no longer eligible for these schemes, the very low interest income derived out of these does not sustain the inflation rate and therefore, automatically becomes a poor investment.

As a Non-Resident Indian, What Can You Do?

With the change in investment rules revolving around the change in resident status during the currency of the maturity period, the NRI has few options in front of him. The first step in the course of action would be to close his accounts. The following are some other things he should consider.

A Indian is considered a non-resident Indian if he has lived out of the country for 182 consecutive days in a 12-month calendar period. His income earned abroad is not taxable in India and he loses certain privileges enjoyed by residents like being able to invest in small time schemes in India.

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