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.
Also Read: How NRI's can invest in Mutual Funds in India?
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 ₹ 500 and maximum amount is ₹ 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 ₹ 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 ₹ 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 ₹ 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.
Also Read: What are the investment options for NRI's where they can invest on repatriation basis?
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 ₹ 1.5 Lakhs per annum each for 15 years and the investment amount would grow to ₹ 94 Lakhs. This is one of the best way to do retirement planning.
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Suresh
Can NRIs continue their existing PPF Account in India
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17 comments
Add a comment ↓I refer to SBI Circular no.Gad/MDS/27/17-18 Reg.PPF Schemr-1968
‘If a resident who opened an Account under this scheme, subsequentely becomes a non resident during the currency of the maturity period,the account shall be deemed to be closed with effect from the day he becomes a non Resident and interest with effect from that date shall be paid at the rate applicable to post office SB A/C up to the last day of the month preceding the month in which the A/C is actually closed’
When the bank has received the money assuring 8.5 % returns can the govt do like this with retrospective effect?
Yes Fernandes
Dear sir my brother had opened PPF account when he was in India in2010 now he is bringing what to do now
I am an nri but my minor son lives in India. Can i invest in my minor son's ppf account as i am his guardian or i have to change his gaurdianship to my wife? Please advise.
Tpdays notification changes everything…
No more PPF for NRIs. Your account will stop earning interest the day you become NRI and will have to be closed…
Thanks for above clarifications. My wife opened the ppf account before bacoming NRE. We continued depositing money in the account. However some of my friends advised me that if PPF authorities detect her NRE status, they would deduct all the interest amount gained and would return only the Capital. Kindly clarify. Also please confirm again if the interest is still 8.7% .
Thanks
Is interest accrued on PPF account is tax free in USA
Hi Rajindra, You need to check with local tax consultants about whether Income receivee in India is taxable in USA or not
In case of nri ppf account before going abroad it is clear that he can cotinue with the account and he can deposit in the PPF account for 15 years .
My question is that the interest accrued in PPF account , IS NRI LIABLE TO TO PAY TAX ON THE INTEREST ACCRUED IN USA ( THOUGH PPF INTEREST ACCRUED IS EXEMPTED FROM INCOME TAX IN INDIA )
I have recently moved to the US. My PPF account which I had opened as a resident matured on March 31. I understand I cannot extend for a block of 5 years with subscription. You mention that if the maturity amount is not claimed, the account get extended automatically for a block of 5 years. But you also say that there is a question mark about what happens to the money. What should NRIs do in such a case? Is it risky to leave the money in an account without contribution? Does it get interest? Does one have to wait for the block of 5 years to be over before claiming the maturity proceeds?
Hi Suresh
Thank you for the informative article. I have a question. I moved to Singapore 4 months back. Have a PPF account tagged to my SBI Resident account (which means deposit happens from that account to the PPF account, I get to check my balance etc from iBanking and on maturity, the proceeds would get credited to that account). My question is how do I get this associated to a NRO account? Whichever bank I talk to they say that I need to close my existing Resident savings account and then my question is what happens to the PPF account tagged to that account? Nobody is able to guide here.
I have the same issue for my NPS too.
An advise on this would be very useful. Thanks.
Regards
MS Nair
My son is NRI in usa he opened the ppf account in the year 2003 when he was in India and depositing reqd allowable limit for tax saving from income generated in India now it is getting matured in the year 2018 . He became NRI last year can he contribute to ppf ac now .he files income tax return in India as well as in usa .
Please advise
Hi Suresh
Thanks for the excellent article. What happens, if an NRI has extended the PPF account beyond the maturity, in ignorance of the rule? What’s the best recourse?
Singh, Beyond maturity, you need to submit relevant PAN card + address proof (this is what I heard from an NRI), hence Post office or bank can reject the extn request and pay maturity amt
Hi Suresh,
I am working in Singapore for last 2.5 years. My Baby born last week in Singapore but Indian citizen. Can I open an PPF account on behalf of my baby.
Hi DG, As indicated in my article, NRI’s cannot open PPF account.
Extremely informative. I must say got to know a lot through this article, and i think PPF is one way of saving and people get benefit of tax saving on the same. I have taken the Tata AIA life's Smart growth plus plan and it's a very good plan and, it offers flexibility in choosing policy term, has good policy returns and tax benefits u/s 80C & 10(10D).