With changes in investment rules for select small savings schemes, the government has said such accounts will be closed before their maturity in case status of the holder changes from resident to non-resident Indians (NRIs).
Such holders will earn only post office savings account rate of 4% and not the higher rate on those instruments when the status was one of resident. In the case of Public Provident Fund (PPF), the account is deemed to be closed the day the status of the account holder changes to NRI.
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...”
Interest with effect from that date will be paid at the 4% rate applicable to the post office savings account up to the last day of the month preceding the one in which the account is actually closed, the Public Provident Fund (Amendment) Scheme, 2017, said.
The amended rules were notified in the official gazette earlier this month. With regard to National Savings Certificate (NSC), a separate notification said it is deemed to be encashed on the day the holder becomes an NRI. “...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,” it stated.
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% interest for both PPF and NSC schemes for October-December.