Smart people move ahead while securing their future. The digitization and email marketing have given a break to the monopoly of the highly educated bank and corporate officials. Now, the investment policies and plans are vulnerable to the commoners as well.

Haven’t you noticed the email prompts from the banks and financial institutions?

I’m dead sure that you’d have glimpsed it. It’s an open invitation through the frequent prompts to invest specific amount. Whether you would be a permanent resident or an NRI (non-resident Indian), the volley of these messages tend to ping on your mobile phone. Even, the inbox seems filled with half a dozen of the lucrative investment plans.

Why do people save money in the PPF account?

Do you know why people tend to chop off a good share of their hard earned money in the PPF (Public Provident Fund) account? Why do corporates die to get a National Saving certificate?

It’s a traditional instrument of securing funds for long term for the salaried employees. They tend to enjoy the privilege of tax deduction. Of course, nobody likes to deduct a good share of his hard-earned money as tax. Hence, they like to invest in the PPF account. This is a government approved privilege that assures save on the tax.

There is one more provision of serving the same purpose. It’s based on the National Saving Certificate (NSC).

What’s the NSC? 

It’s basically related to the small savings. The government offers savings bonds in its form. The Indian Postal Service (IPS) is the competent authority that issues it. This is a good alternative to choose for a small NRI investment and saving tax.

What’re the benefits of PPF (Public Provident Fund) and NSC (National Saving Certificate)?  

1. Risk free long term investment:

Since these are the offerings of the Indian government, any NRI or permanent citizen can invest. The government takes guarantee to credit the licit and prevailing interest rate on them. The chances of money laundering and fraud will be negligible.

2. Interest income from PPF a/c & the NSC exempt:

As per the Section 80 C of the Income Tax Act, 1961, the eligible investors can take leverage in the tax up to INR 1.5 lakh. Those who have the NSC can also have the same privilege of tax deduction.

However, these schemes are subject matter of the government affair. Therefore, it is the only competent body that can make the changes in it.

Perks from government in Tax:

1. The government offers 7.6% per annum interest rate over PPF & NSC. It was around 8 percent during the previous financial year, i.e. January-March 2018. This rate of interest is altered quarterly.
2. As foretold, the government is a decision maker that defines the applicability of these schemes over the NRIs. Recently, it pushed them out of these schemes’ benefits. Their benefits are meant for only residents now.
3. If its holder would qualify for an NRI status, the PPF fund or the NSC account would be terminated. The accumulated money in these accounts would draw the minimum interest that would be equal to a Post Office Savings Account (POSA). Currently, it’s around 4%.

Tax deduction applicability:

1. Section 80C of the Income Tax Act would be identically applicable over the residents and non-resident Indians. Therefore, the NRIs would be able to enjoy the privilege of tax deductibility under this Act.
2. The residency would be no issue under the tax laws and the foreign exchange regulations. It would define the non-residents on the basis of the physical presentism in India. There are a few contradictions since the Foreign Exchange Management Act (FEMA) distinguishes the NRIs as the ones living in the foreign. So, this clause needs more clarifications.
3. If the non-residents want to invest in the other NRI services, like the EPF (Employees Provident Fund) in India, the other international treaty as the India-Singapore Comprehensive Economic Cooperation Agreement (CECA) would not be impacted.