New PPF rules NRIs should know
01 May 2023

New PPF rules NRIs should know

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Key Takeaways: Public Provident Fund (PPF) schemes are popular investments in India. As an NRI, you might want to know if you can open a new PPF account or if you can retain your existing PPF account. Here’s all you need to know about PPF for NRIs.

The Public Provident Fund is a popular long-term saving scheme from the Government of India. It provides safe and guaranteed returns and is one of the most tax-friendly investments. As an NRI, however, you cannot open a new PPF account and invest in it. But in case you already had a PPF account before you became an NRI, then you can continue to hold it till the scheme’s maturity.

The 2017 PPF - NRI notification

A government notification released on 3rd October 2017 amended the Public Provident Fund rules and stated that you will need to close the PPF account the day you become an NRI. It also said that if you choose to continue the account, the rate of interest accrued will be reduced to the rate applicable to the Post Office Saving Account (currently 4% per annum*).

Prior to this rule, NRIs (who had a PPF account as a resident Indian) could invest in the fund through an NRO account. They also enjoyed the same rate of interest given to a resident Indian, which was about 7.8% per annum in 2017.

The government made amendments to this rule in 2018 and set out revised guidelines for existing PPF account holders. You will also have to consider what happens to your PPF balance. You will need an NRO account to transfer the balance amount.

PPF rules for NRIs

Here are the rules laid down with regards to PPF Accounts for NRIs. As an NRI:

  • You can continue to invest in the existing PPF Account, i.e., the account opened when you were a Resident Indian.
  • You cannot open a new PPF Account after becoming a Non-Resident Indian.
  • You must close the account after the 15 years maturity period.
  • You cannot extend the maturity period.
  • Interest rates will be reviewed by the Government of India every quarter and can be changed.

Interest earned is exempt from taxes

Procedure for withdrawal

You can close the PPF account prematurely after five years to pay for your higher education or your child’s higher education if your child is the primary account holder. Another instance where premature withdrawal is allowed is to pay for a medical contingency where you or your loved one is diagnosed with a life-threatening illness. Else, you can close your account after maturity and withdraw the funds. However, these funds are non-repatriable which means that you cannot transfer the money abroad.

To close the account, you need to submit the PPF withdrawal form, PPF passbook from your bank, photo identity card and a cancelled cheque from your NRO account to which you want the PPF balance credited. If you are not available to complete all formalities, then you can send a representative with an authorization letter. The documents need to be attested by your bank’s branch manager before they are submitted.

Once the process is completed, the funds will be transferred to your NRO account.

Common questions relating to NRIs and PPF Accounts

  1. Can NRIs have a PPF Account?

    Yes, as an NRI, you can have a PPF Account. However, the account must have been opened when you were still a Resident Indian, i.e., prior to your becoming a Non-Resident Indian. You can invest in the existing PPF account until maturity, i.e. 15 years, but you cannot utilise the account extension option, i.e. extending the PPF account in blocks of five years. You may also not open a new PPF Account if you have already assumed NRI status and are residing overseas.

  2. Can NRIs invest in PPF in India from a foreign country?

    Yes, NRIs can invest in PPF under the following conditions:

    • NRIs may invest in the PPF account they opened when they were Resident Indians.
    • They cannot open a new PPF account after assuming Non-Resident Indian status.
    • Existing PPFs are non-repatriable until maturity, and NRIs can keep investing till the PPF account matures.
  3. Can NRIs open a PPF Account?

    No. If you are an NRI, you cannot open a new PPF Account once you change your residence status. If you have an existing PPF Account opened when you lived in India, you can continue to invest money in the account until maturity, i.e., 15 years or until the PPF Account’s extended maturity. E.g. If you extended the PPF account in the 17th year, you may deposit money in it only up to the 20th year. You can extend it further.

  4. Are there alternatives to PPF for NRIs?

    Besides PPF, NRIs can invest in:

    • NRI Fixed Deposits: You can park your foreign earnings in NRE or FCNR FDs, or open an NRO FD with your Indian earnings.
    • Mutual Funds: You can invest in a wide range of Equity and Debt Mutual Funds of your choice.
    • Real Estate: You can buy, sell or rent out properties in India.
    • Trading: You can buy and sell shares on the Indian stock exchanges.
    • National Pension Schemes: You can open NPS tax-saving accounts offered by the Government.
    • Unit Linked Insurance Plan (ULIP): You can invest in ULIPs that combine insurance and investment.

Final Note: PPF combines fixed and safe returns with good tax efficiency. It’s one of the few investments that is classified as Exempt, Exempt, Exempt (EEE) – your investments are tax-deductible; the returns are tax-exempt and so are the maturity proceeds. So, if you are an NRI with an existing PPF account, continue holding it by all means.

Since you may not be able to invest in a new PPF account now, speak to our dedicated Relationship Managers to understand the fixed income investment opportunities available in India. Get started with a DBS Treasures NRO Account. Apply Now!

*Please note that the interest rates are applicable as on April 2020 and are subject to change.

Disclaimer: This article is published purely from an information perspective and it should not be deduced that the offering is available from DBS Bank India Limited or in partnership with any of its channel partners. The purpose of the Live eNRIched blog is not to provide advice but to provide information. Sound professional advice should be taken before making any investment decisions. The bank will not be responsible for any tax loss/other loss suffered by a person acting on the above.