Small savings benefits of NRIs cut

MUSCAT: Non-resident Indians (NRIs) will not be able to enjoy small savings scheme benefits, the Indian government has announced.

With changes in investment rules for small savings schemes including National Savings Certificate (NSC), the Indian government has said such accounts will be closed before their maturity if the status of the holder changes from resident to non-resident.

Such holders will earn only post office savings account rates of 4 per cent and not the higher rate enjoyed by residents of India.

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 nonresident...”

The amended rules were notified in the official gazette.

With regard to the National Savings Certificate, a separate notification said it is deemed to be encashed on the day the holder becomes an NRI.

Last month, the Indian government kept interest rates on small savings schemes unchanged 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.

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 under Income Tax Act rules. When a person doesn’t satisfy both these conditions, he is termed as a non-resident Indian.

NRIs cannot open a new PPF account in India, but they were allowed to keep contributing to their existing PPF accounts as per a 2003 notification. This was for the PPF account they opened prior to becoming NRIs.