The government of India has revised the investment rules relating to investments by non-resident Indians (NRIs) in small savings schemes. The amended rules have been notified in a gazette notification.
Such changes stipulate that certain NRI accounts in small savings schemes, will be closed prematurely if the status of the accountholder changes from resident to NRI.
Resultantly, such accountholders will earn only post office savings account rate of 4% p.a. and not the applicable higher rate on the subject instruments when the status was that of a resident.
For accountholders of Public Provident Fund (PPF), the account shall be deemed to be closed the day their status changes to NRI.
The concerned amendment to the Public Provident Fund Act, 1968 stipulates 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...”
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.
A separate notification has been issued in respect of National Savings Certificate (NSC), which says that an NSC 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”.
Bhumesh is the Managing Partner of Corp Comm Legal, an Indian law firm. He is ranked among the Top 100 Indian corporate lawyers. He is advising domestic and foreign companies on M&A, joint ventures, corporate - commercial issues. Besides, he has written a book on Drafting of Commercial Agreements, has a couple of books in pipeline and trains students and professionals on Drafting Skills and corporate laws. He writes regularly on legal, business & other issues and is a guest faculty lecturer with educational institutes. Bhumesh holds a Bachelor of Laws (LLB) from the University of Delhi and a further qualification in International Law and Legal Studies from College of Law, York.