Recently Government Of India changes the rules in relation to PPF and NSC for NRIs. Let us see the new amendment rules of 2017.
PPF and NSC for NRIs -Rules before Amendment
To give you the better understanding of current changes, let me give you in detail the existing rules of PPF and NSC for NRIs. This will clear you the changed rules.
PPF for NRIs
As of now, NRIs were not allowed to open the account. However, if they already opened the account when they are resident Indians, then they can continue the account till maturity.
Do remember that they also can’t extend the account for the block of 5 years. Hence, if you complete the 15 years period, then you have no option to close it. At the same time if your account is already extended for the block of 5 years, then you are not allowed to extend for another block of 5 years.
NSC for NRIs
As of now, NRIs were not allowed to invest in NSC. However, the rule was clear that “Provided that if a resident who subsequently becomes Non-Resident Indian DURING the currency of maturity period, shall be allowed to avail the benefits of the certificate on maturity on a Non-Repatriation Basis”.
Hence, if you are resident Indian at the time of buying NSC, and later your tax status changed to NRI, then you can continue the NSC up to the maturity.
PPF and NSC for NRIs – Amendment Rules 2017
Government Of India amended these rules in case of PPF and NSC for NRIs on 3rd October 2017. Now the new rules are as below.
PPF for NRIs – Amendment Rules 2017
The notification says “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“.
Hence, as per this new amendment, NRIs are not allowed to continue the PPF up to maturity. Their account will be closed immediately once their status changes to NRI from resident Indian.
Now the interesting point in regards to interest payout once you turn to be NRI is “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”.
This means let us assume your residential status changed from Resident Indian to NRI on 25th October 2017 and Post Office Savings Account interest rate for September 2017 was at 4%, then your PPF will earn 4% interest from 25th October 2017.
NSC for NRIs – Amendment Rules 2017
As I told you above, earlier only resident individuals are allowed to invest in NSC but not NRIs. However, they can continue it till maturity.
Now the notify says as “Provided that if a resident who purchased the certificate, subsequently becomes a 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 ab interest shall be paid at the rate applicable to the Post Office Saving 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“.
Hence, as per the new amendment rule, you no longer be allowed to continue your NSC till maturity. Your account will be closed immediately when your residential status changes from Resident Indian to Non-Resident Indian.
Also, after closure, the applicable interest rate will be Post Office Savings account interest rate.
How it affects to NRIs?
I think this is a big jolt to NRIs. They used to enjoy PPF and NSC up to maturity with high-interest rates. Especially with PPF as it long-term product and they can easily earn a higher return in PPF for a long term. However, now the Government closed this option for them.
Few asked me about notification. One of our blog readers shared this Government of India clarification in this regard. Hope this will clear the doubts of all NRI PPF Investors.
Refer our few posts related to NSC and PPF
- PPF Account for Minor and Wife – Rules, Tax Benefits and Tricks
- Premature closure of PPF account – New Rules 2016
- PPF withdrawal rules & options after 15 years maturity
- 15 Rules of availing Loan against PPF (Public Provident Fund)
- How to transfer PPF Account from Post Office or Bank to another Post Office or Bank?
- Excel PPF Calculator-Calculate goal, loan or withdrawal amounts
- All about Public Provident Fund (PPF)
- PPF-When to contribute to get higher returns?
- NSC-Accrued Interest taxation and way to reduce it
- How to transfer NSC from one person to another?
- NSC and KVP in e-mode and Passbook mode from 1st July 2016
- How to encash or withdraw NSC bought from different Post Office?
- Post Office Savings Schemes (RD, NSC, MIS, SCSS)-Premature closure rules