The recent amendment to small saving schemes holds that if residential status of an individual changes to NRI then his PPF account as well as NSC both shall be deemed to be closed from the date of change of his status. The rates for these small savings schemes is decided quarter on quarter based on the yield of government bonds and for the current quarter ending December, the rates for both NSC and PPF remain at 7.8%.
However on change of residential status to NRI, PPF accumulation shall fetch just 4% returns not enough to beat inflation and the same goes with NSC account as it would also fetch returns at par with earnings from post office savings account.
So, personal finance experts depending on the plans of NRIs such as whether they wish to settle abroad or in India later in life, taxation in the country of residence as well as repatriation norms for different investments advice the following:
1. With low return of 4% not enough to beat inflation, withdraw accumulation from PPF or NSC account: Do not continue with your investment in these accounts and scout for better investment alternatives with better returns. For higher safety, you can park your corpus in government backed securities or individuals with moderate risk capacity can opt for debt or equity mutual funds.
2. NPS or other non-repatriable investment products can be an option if you wish to settle eventually in India:
Look for other better investment alternatives to build your retirement corpus such as National Pension Scheme or NPS if you plan to eventually return to India. NPS which enables you to save on your tax outgo also helps in saving huge chunk with different fund options i.e a mix of both debt and equity.
It is advised that those Indian natives working in gulf countries as they are not likely to settle there can open and maintain an NPS in India as such an account does not arise any tax implications in their country of residence.