Can NRIs invest in NSC, PPF and other post office schemes?

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 Can NRIs invest in NSC, PPF and other post office schemes?
Non resident Indians (NRIs) are not allowed to invest in post office savings schemes. This means they cannot invest in instruments like the National Savings Certificates, Public Provident Fund, Monthly Income Schemes and other time deposits offered by the post office.

Interestingly, NRIs are also not permitted to invest in government savings bond. It's still not clear as to why non resident Indians are not allowed to invest in the post office schemes, but presently the law does not allow them.

If a NRI needs to invest in the post office savings scheme he or she can still do so. He or she would have to do it through his parents or other friends who are resident Indians and in their name. However, in that case remember that your parents income is taxable, since post office schemes attract tax, apart from the PPPF. 

Even if opened to NRIs, it's not as if post office savings schemes would be a big draw for non resident Indians. This is simply because there is a tax liability on post office schemes, while an NRI can get tax free income on his NRE fixed deposits.

Pertinently, along with being tax free, NRE fixed deposits offered by banks have a higher rate of interest then some of the post office schemes. Interestingly, NRIs can also look at investing in property, tax savings bonds, IPOs, mutual fund schemes etc., where they are permitted to invest.

Who is an NRI?

A non resident Indian as per India's Foreign Exchange Management Act 1999 (FEMA), is an Indian citizen or Foreign National of Indian Origin resident outside India for purposes of employment, carrying on business or vocation in circumstances as would indicate an intention to stay outside India for an indefinite period. An individual will also be considered NRI if his stay in India is less than 182 days during the preceding financial year.

Also read is it illegal for NRIs to maintain a resident savings account?

Where should NRIs invest, if not post office schemes?

There are plenty of places that NRIs can invest, since they cannot invest in post office schemes. Among the more popular ones would be the NRE fixed deposits. For example, the interest rate on NRE deposits, may not be as high as post office schemes, but, they are marginally lower. 

There are also select other schemes like company deposits, where you can park your money. However, not only company fixed deposits are open to NRIs. 

We strongy recommend that you do not place money in NRO deposits. This is because they are taxable, as compared to to NRE fixed deposits. 

In fact, even interest on all of the post office schemes are taxable, apart from the PPF. So, even if post office schemes were opened-up to NRIs, that are in no way tax efficient. Your returns are much better on NRE accounts, simply because they are not taxable. 

NRIs can also look at investments in real estate which can give returns in the long term. Remember, the tax liability on every kind of investment. 

Read: Difference between NRE and NRO Account

Read more about: nris, ppf
Story first published: Tuesday, April 30, 2013, 9:56 [IST]
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