Return from PPF (Public Provident Fund) and NSC (National Savings Certificate) will nearly halve from the day you become an NRI. According to the latest changes in rules, if a PPF account holder turns NRI, the account will be deemed closed even if it has not matured and will earn interest at the much lower rate applicable to Post Office savings account. Similarly, for NSC, if the certificate holder becomes an NRI, the certificate will be deemed to be encashed on the day he or she becomes a non-resident (NRI) and the interest will be paid at the rate applicable to the Post Office savings account till it is encashed.
Latest PPF, NSC Rule1) NRIs are not allowed to invest in small savings schemes like NSC and PPF. However, they were earlier permitted 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 while Post Office savings account get 4 per cent.
3) The government notification on PPF dated October 3 states, "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 means PPF accounts would 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 date the PPF account is closed.
5) Similarly, in a notification dated October 3 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."