Government of India has amended rules of PPF accounts for overseas Indians. Your PPF account will be closed if you become an NRI. And the interest rate has also been lowered to 4 per cent.
According to the latest rules, if one becomes a non-resident Indian, one will earn smaller rate of interest in small savings schemes such as Public Provident Fund (PPF) and National Saving Certificates.
Under the new rules, if one has already invested in small savings schemes like PPF and NSC and becomes a NRI, the investments will be deemed closed.
According to the amendment to the Public Provident Fund Act, 1968, "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."
A person is considered resident in India if he is in the country for 182 days or 60 days in a year and 365 days in each of the preceding four years as per Income Tax Act. When a person doesn't satisfy both these conditions, he is termed as NRI.
1) NRIs will not be 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) New interest rate for PPF and NSC are 4 per cent. Earlier it was 7.8 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) Accountes opened prior to becoming NRIs will be deemed closed from the date of getting an NRI status.
5) The notification by 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."
