A lot of Non-resident Indians across the world wish to save their hard-earned money in India, and hence a lot of them keep enquiring about whether they can invest in PPF and NSC accounts and receive a high return on safe investment.
Here is what NRIs should do when facing PPF, NSC accounts closure?
The returns on the PPF, NSC accounts accumulation will not even beat inflation, and hence it is advisable to opt for better alternatives.
If your residency status has changed to an NRI (non-resident Indian), your National Savings Certificate (NSC) and Public Provident Fund (PPF) accounts will now be assumed to be closed. Your PPF accumulation in such situation will earn you a meagre 4 percent, while the NSC will earn you the rate addressed in post office savings account. Both PPF and NSC accounts give interest income of 7.8 percent interest at present.
what should NRI’s do who have PPF and NSC accounts?
Personal finance advisors feel what should NRI’s who have PPF and NSC accounts do now with their corpus in these small savings accounts?
- The money ought to be withdrawn and invested in instruments that assure to give you better returns.
- The accumulation in NSC/PPF can be withdrawn. The returns will not even beat inflation, and hence it is advisable to opt for better alternatives.
- The accumulation in these accounts ought to be changed to investment products which offer better returns.
- The issues to consider is whether the NRI would want to ultimately settle in India or overseas, repatriability of Indian investments and the laws associating to taxation in the nation where they are residing.
- If an NRI has intentions to return to India and wants to have a retirement corpus back home, then they should acknowledge investing in the National Pension System (NPS).
- If an NRI plan to come back to India in the long-term and his/her retirement needs are unmet, he/she should consider NPS as an alternative.
- NPS gives different fund options depending on your risk appetite. The returns in NPS will be higher as compared to returns in any investments in developed markets.
However, the considerations would be different for NRIs in different nations.
- If an NRI in the US and unsure of future plans and could settle down there after retirement, NPS will not make any sense. He/she will have to disclose the investment and the annuity under the Foreign Account Tax Compliance Act (FATCA).
- If an NRI is in Gulf countries, he/she ought to be considered NPS in any which form since they are not constrained to any kind of tax. NPS is best for NRIs in Gulf nations because such NRIs don’t have prominent option to settle in those nations after retirement. Usually, NRIs in Gulf nations will come back to India after 25-30 years of working life and use NPS to build a solid retirement corpus through a combination of equity and debt.
- Repartriability of funds is another matter that NRIs should consider.
Before talking about retirement options, it is necessary to first analyze if the repatriability of invested funds. If the NRI plans to come back to India in the future, he/she can opt for non-repatriable products while if that’s not the case, only repatriable investment options should be analyzed. Once the problem of repatriability is settled, the investor should analyse the risk tolerance and opt for products that suit his/her needs.
NRIs who would have an accumulation in their PPF and NSC accounts can consider equity and debt mutual funds to collect their funds, besides other safe options such as government securities.