Public Provident Fund (PPF) is a popular investment option for long term savings. Returns from PPF and National Savings Certificate (NSC) will drstically slash to halve from the day you become an NRI. There have been certain changes in the PPF rule which state that if a PPF account holder turns NRI, the account will be deemed closed even if it has not matured and the interest received will be at a very low rate applicable to the Post Office savings account. LIkewise, for NSC, if and when the certificate holder becomes an NRI, the certificate will have deemed to be encashed on the day of him/her becoming an NRI with the interest being payable at the much lower rate applicable to the Post Office savings account till it is encashed.
Latest PPF and NSC Rules:
1) NRIs are not permitted to invest in small savings schemes like NSC and PPF. However, they were earlier allowed to retain their PPF account if they had opened it before becoming an NRI.
2) PPF and NSC currently fetch an interest rate of 7.8 per cent.
Post Office savings account get 4 per cent.
3) The government notification on PPF dated October 3, 2017 states that, “Provided that if a resident
who opened an account under this scheme, subsequently becomes a non-resident during the currency of the maturity period, the account shall be deemed to be closed with effect from the day he becomes a non-resident and interest with effect from that date shall be paid at the rate applicable to the Post Office Saving Account up to the last day of the month preceding the month in which the account is actually closed.”
4) This implies that the PPF accounts will be considered closed prior to maturity in case the holder becomes a non-resident Indian (NRI). The investor will be then paid interest at the rate applicable to Post Office savings accounts till the last day of the month that immediately precedes the month in which the PPF account was closed.
5) Similarly, in a notification dated October 3, 2017 on NSC, the finance ministry says: “Provided that if a resident Indian having purchased a certificate, subsequently becomes Non-Resident during the currency of the maturity period, the certificate shall be encashed or deemed to be encashed on the day he becomes a non-Resident, and interest shall be paid at the rate applicable to the Post Office Savings Account, from time to time, from such day and up to the last day of the month preceding the month in which it is actually encashed.”