An NRI can be named as a nominee for a resident Indian's Public Provident Fund (PPF), National Savings Certificate (NSC) or Senior Citizen Savings Scheme (SCSS) account. But receiving the proceeds as a nominee does not automatically mean the money can be sent overseas.
Under Rule 14(9) of the Government Savings Promotion General Rules, 2018, introduced through the 2023 amendment, payment to an NRI nominee is made on a non-repatriation basis, explained Anshuman Jagtap, Partner at Economic Laws Practice.
Nominee status is different from eligibility
Being listed as a nominee does not make an NRI eligible to open or operate a small-savings account.
“Nomination is not investment eligibility,” Jagtap told Mint.
Therefore, an NRI cannot assume that being named as a nominee gives them the right to subscribe to or continue a PPF, NSC or SCSS account where the scheme's rules do not allow it.
The nomination should also be formally registered with the post office or authorised bank. Mentioning a person in a will or family document is not the same as registering them as a nominee with the institution.
What happens after the account holder dies?
An NRI nominee has to notify the relevant post office or bank and submit the prescribed death claim.
Depending on the institution and scheme, the paperwork may include the death certificate, claim form, identity and address proof, proof of NRI status, overseas address, passbook or certificates and bank details. Additional tax or FEMA declarations may also be required.
An NRI nominee cannot automatically continue an SCSS account after becoming the beneficiary. Eligibility to operate or continue the account has to be assessed separately under the applicable rules.
Can the money be sent abroad?
This is where the non-repatriation condition matters.
Payment to an NRI nominee under Rule 14(9) is made on a non-repatriation basis. In other words, nomination alone does not permit the proceeds to be directly remitted outside India.
“Any subsequent remittance would be governed separately by the applicable FEMA/RBI rules and the nominee’s banking arrangements,” Jagtap added.
So, receiving the money and sending it abroad are two separate questions, governed by different rules.
Does the nominee automatically own the money?
Not necessarily.
A registered nominee can generally make the claim and receive the proceeds, but nomination does not always settle who ultimately owns the money.
Under the Government Savings Promotion Act, 1873 and the 2018 rules, a nominee can be designated as the owner or as a trustee for the legal heirs, depending on the applicable provisions.
The final entitlement can also depend on factors such as a valid will, succession law, competing claims and whether the nominee is also a legal heir.
Does an NRI have to visit India?
Not always.
Depending on the institution's procedure, an NRI nominee may be able to complete the claim through an authorised representative or power of attorney. Overseas documents may need notarisation, apostille or attestation by an Indian Embassy or Consulate.
A special power of attorney may be accepted where permitted, but a general power of attorney should not automatically be assumed to be sufficient.
For investors, the key point is simple: nomination, ownership and repatriation are three separate matters. An NRI can be a nominee, but the payment and any subsequent overseas transfer remain subject to the relevant rules.