It’s very clear that government is doing its best to reduce the subsidy liability and wants to bring everyone to “market-linked” umbrella. But NRI’s being the center of attraction, did not expect that they will not be allowed to share the benefits of PPF & NSC. PPF for NRI & NSC for NRI has changed in 2017 and again in 2018. Here are recent rules governing PPF NSC for NRIs is undergoing changes.

PPF for NRI rules have created confusion as circular in 2017 restricted NRIs and circilar in 2018 ruleed out the earlier circular. Bust since then no change. Check the Ministry of Finance (Dept of Economic Affairs Page) here.

Present government which is somewhat like “fan” of NRIs has taken this adverse step. Reason?- Go Ahead and read in this article.

The change is simple but will be hard on NRIs. But these are uncontrollable factors and one must think beyond what is bound to happen. NRIs have many options to invest and they should continue investments for future.

A quite circular on 3^rd Oct 2017, rolled out the new changes for PPF for NRI & NSC for NRI

These rules will be called:

• Public Provident Fund (Amendment) Scheme, 2017
• National Savings Certificate (VIII-Issue) (Amendment) Rules, 2017

These will be effective Oct 3^rd, 2017 & Retrospectively.

These rules will apply now to all NRIs. (Read below for latest UPDATE)

Changes / Amendments in PPF for NRI

After 3^Rd October 2017

• An NRI cannot open a PPF Account (existing rule)
• A resident becoming NRI if already has a PPF account, his account will be compulsory closed effective the day he acquires NR status.
• In the above case, the NRI is free to take his money back. If he does not, then he will only be paid savings bank interest from the day of account opening till he withdraws his balance. (As per circular, even if you have a PPF account in bank, the rate payable is post office savings bank account only)

Changes / Amendments in NSC

After 3^Rd October 2017

• An NRI cannot purchase NSC.
• A resident becoming NRI if already has an NSC, he needs to compulsory surrender NSC for payments. The certificate will be compulsory closed effective the day he acquires NR status.
• In the above case, the NRI is free to take his money back. If he does not, then he will only be paid post office savings bank interest from the day of issue of NSC till he withdraws his balance.

Currently, both PPF & NSC earn 7.8% pa at the time of writing. These are changed or reviewed every quarterly.

2019 UPDATE: As mentioned earlier New NRIs cannot open a PPF Account. In case you have a PPF account before you became NRI, the NRI can continue PPF account till maturity. You can continue to invest from your NRO/NRE A/C. On maturity, you will have to take back your money, as NRI can no longer ask for an extension of account.

Implications on PPF for NRI & NSC for NRI

• The objective behind this moves seems to be that they want to reduce their interest burden.
• This investment In NSC will be deemed to be closed on the day the investors become Non-Resident.
• As NRI, if you have a PPF account you can continue. You cannot open a new. Also you cannot extend on maturity.
• Many other avenues of investment remain open to NRIs wishing to invest in India Story. These include equity market, mutual funds, NPS, fixed deposits, and real estate (both residential and commercial, but not agriculture land).

What to do now?

• If you are in an industry (like IT, export or Merchant Navy etc) where you are likely to acquire NRI status soon, it is better not to open PPF account.
• If you are in a job or business where you have to travel abroad a lot including stays, it will be difficult to open and close PPF frequently. We are also waiting for clarity for such cases.
• If it is an uncertainty regarding your future career, go ahead and open while you are resident. A return of 7.6% fixed that to tax-free with Section 80C savings is a good option. But the moment you acquire non-resident status, contact bank/post office and close the account. The amount you get is tax-free and can be invested in other avenues using NRO a/c.

What Next? Other Avenues

1. NRIs also get the benefit of FDs in NRE A/C which is tax-free. The money will move there especially who want to remain in Debt with fixed and known rate of return.
2. One can look at NPS (Debt Funds), which is still an option opened to NRIs. But you have a long lock-in, market-related returns and 40% will only be refunded through a pension. If that suits you fine. Otherwise;
3. Mutual Funds are the options open for NRIs with all tax benefits and minimum lock-ins.

What I think on this issue of PPF for NRI

The subsidy is a large part of any developing country’s balance sheet. You need to pay incentives so that people invest and money comes into system & markets.

But subsidy/sops should be time-bound and prudent. These cannot be long-term measures. So despite Government knowing that NRI’s have voting right, they did the right thing by saving some money for the real needy ones.

For real investors, many options still open and India will give very handsome returns. No Doubt about that.

As of now, if you are going to be NRI soon, one more work is added to your checklist before moving. Close your PPF & surrender NSC Certificates. That is our take on PPF NSC for NRIs.

Hope you liked the article on PPF NSC for NRIs amendments 2017 and have a view on this move. Do share it below.

Also, forward this article to your NRI friends and relatives to tell them you care.