Can NRIs continue their existing PPF Account in India?
Recently, I have been receiving messages and emails from NRIs about whether they need to continue their existing PPF account in India or whether we need to close such PPF Account. I thought I can write an article about some of the facts about NRI PPF account management and any limitations towards that. Should NRIs continue their existing PPF Account in India?
9 Facts about NRIs and their existing PPF Account in India
1) NRI’s cannot open new PPF Account
As a guideline, NRI’s cannot any new PPF account in India. Best way is to open PPF Account before NRI’s go on their onsite job / business.
2) NRI’s can continue existing PPF Account
NRI’s need not close their existing PPF account, but can continue the PPF account which they have opened when they were resident of India. Prior to 2003, NRI's were not supposed to contribute to their existing PPF Account. However with a new notification from Govt. of India, from 2003 onwards, they can contribute to their exisitng PPF account. However there are some limitations on PPF account management by NRI’s.
3) NRI’s can transfer from NRE / NRO account to PPF A/c
NRI’s can transfer money from their NRE account or NRO account to their existing PPF Account. Minimum amount to be transferred per year is Rs 500 and maximum amount is Rs 150,000 per annum.
4) NRI's can repatriate upto USD 1 Million
NRI's can deposit their PPF account maturity in NRO account and can repatriate upto USD 1 million.
5) No special interest rate for NRI's
There is no change in interest rate for existing resident Indians or for NRI’s. Currently it is 8.7% per annum.
6) PPF Maturity extension not possible
Generally, PPF account has a lock-in period of 15 years and it can be extended for another 5 years block period. However NRI’s cannot extend their PPF account beyond 15 years lock-in period. However, if maturity amount is not encashed, it would remain as "non contributable" PPF account. Means one need not deposit minimum of Rs 500 per annum. This is still a question mark as what happens to NRI's PPF account who does not claim the money at maturity of 15 years. It would extend automatically, but they cannot contribute further to the PPF account.
7) No specific tax exemptions
Like resident Indians, even NRI’s would get tax exemption upto Rs 1.5 Lakhs per annum for the investment in PPF account. This way they can reduce their taxable income. Also the Interest from PPF account is tax free.
8) Deposit by 5th April to get maximum Interest
NRI’s can invest Rs 1.5 Lakhs per annum before 5th of April and can get maximum tax free interest for the year. Even every month, interest would be paid on lowest balance between 5th to 30th of every month. Means if you deposit by 5th, you would get interest for that month.
9) NRI's can plan Retirement planning through PPF
In case an individual has plan to go to onsite for job or business for few years, it is better to open PPF Account along with spouse before travelling. This way both can invest Rs 1.5 Lakhs per annum each for 15 years and the investment amount would grow to Rs 94 Lakhs. This is one of the best way to do retirement planning.
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Can NRIs continue their existing PPF Account in India