NRIs like resident Indians prefer investments in PPF and NSCs with a reasonable tax-saving return of 7.8% per annum currently. But recent changes to the small saving schemes including NSC and PPF that made these deposits out of bounds for an NRI as they are deemed to be closed upon change of a person's residential status to non-resident Indian.
So, in case your residential status has happened to change to NRI recently, it will be in your interest to get the account closed and withdraw funds from such NSC or PPF accounts. As else you might earn interest of just 4% offered by a post office savings account which is not even enough to beat the rate of inflation.
Know how NRIs can withdraw their accumulated PPF or NSC corpus here.
So, with enough corpus at hand redeemed through your PPF or NSC accounts in India, here are listed a few alternative high-yielding investment options that are tax-efficient as well. But before diverting your funds you ought to consider your investment purpose, time horizon as well as tax implications.
1. Debt mutual funds: If you started with your PPF investments to create a sizeable corpus for your retirement, you can now park your funds in any good performing debt mutual fund scheme (diversified or large-cap scheme) that gives tax-efficient returns.
NSC which is a one-time short-term savings investment avenue in comparison to PPF is also to be closed if the residential status of a person changes to NRI. The funds withdrawn from it can also be parked in debt mutual funds that guarantee huge safety with high returns and liquidity at the same time. The investment in this fund category is in general parked in AAA rated bonds or government security. Indexation benefit is also provided to the investor.
2. NPS: If the NRI has plans to return to India and has a moderate risk profile with flexibility in respect of liquidity, National Pension Scheme that allows allocation to G-securities, corporate debt or equity depending on the investor's risk profile can be betted upon. Additionally, tax deductions on NPS investments are allowed u/s 80C and 80CCD(1). There is no restriction in respect of repatriation of pension amount.
3. FCNR and NRE deposits: NRIs who need income stream in India and are categorized under conservative type can earn 6-6.25% by maintaining their amount in NRE account. The depositor in NRE deposits is not exposed to any currency or market risk and returns are tax free. Other NRIs who do not have plans to come to India in foreseeable future can park their sum in FCNR account to protect themselves against any currency fluctuations.