PPF, NSC returns will be halved if investor's status changed to NRI: All you need to know

Indian residents having investments in saving schemes like public provident fund (PPF) or national savings certificates (NSC) will not get high returns if they become non-residents Indians (NRIs). 

According to the new rules issued by the government, PPF and NSC will be now closed on the day the investor becomes a non-resident. Besides, the interest would also be paid at the post office savings account rate, which would be quite lower. 

At present, both the PPF and NSC schemes 7.8% annual return, much more higher than the banks. 

"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," the notification said. 

It further added that the "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". 

The post office savings account now pays 4% per annum return. 

Last month, the government kept unchanged interest rates on small savings schemes for the October-December quarter. Since April last year, interest rates on all small saving schemes have been recalibrated on a quarterly basis.

The government has pegged 7.8 per cent interest for both PPF and NSC schemes for October-December.

Public Provident Fund or PPF is a goverment supported long-term investment scheme, that allows the subscriber to invest minimum Rs 500 to maximum Rs. 1,50,000 in one fiscal year and can even avail the facilities such as loan, withdrawal and extension of account.