Can NRIs invest in PPF? What rules say for people who have moved abroad | Personal Finance

The Public Provident Fund (PPF) is a popular long-term savings scheme because of its government backing, guaranteed returns and tax benefits. The scheme offers an interest rate of 7.1 per cent and follows the Exempt-Exempt-Exempt tax treatment, making both the interest earned and maturity amount tax-free in India.

 

However, many Indians who move overseas for work or settle abroad often wonder whether they can continue investing in PPF or even open a new account after becoming an NRI.

 

The answer depends on when the account was opened.

 

 

Under the Public Provident Fund Scheme, 2019, only resident individuals are eligible to open a PPF account.

 
 

This means Non-Resident Indians (NRIs), Persons of Indian Origin (PIOs) and Overseas Citizens of India (OCIs) are not allowed to open a fresh PPF account after they become non-residents.

 

If a person has already acquired NRI status before applying, they are not eligible to invest in the scheme.

 

The rules are different for people who opened a PPF account while they were residents of India and later became NRIs.

 

Such account holders can continue operating the existing account until it completes its original 15-year tenure.

 

They can also continue making deposits within the prescribed limits during this period.

 

The annual contribution rules remain unchanged:

 

• 
  Minimum investment: Rs 500 per financial year
• 
  Maximum investment: Rs 1.5 lakh per financial year
• 
  Contributions are generally made through an NRO account, depending on the bank’s operational process.
• 
  No extension after maturity

 

A major difference between resident investors and NRIs relates to the extension facility.

 

Resident Indians can extend their PPF account after the initial 15-year maturity in blocks of five years. They may continue making fresh deposits during the extension or retain the account without further contributions, subject to the scheme’s rules.

 

NRIs, however, cannot opt for these five-year extensions.

 

Once the original maturity period ends, the account has to be closed and the maturity proceeds withdrawn.

 

 

After the account matures, the accumulated corpus, including the interest earned, is generally credited to the account holder’s Non-Resident Ordinary (NRO) account.

 

If an NRI wants to transfer the money outside India later, the amount would have to be repatriated from the NRO account in accordance with the Reserve Bank of India’s rules and applicable documentation requirements.

 

 

The rules become stricter if an individual ceases to be an Indian citizen.

 

Once a PPF account holder acquires foreign citizenship, the account is treated as closed from the last day of the month preceding the month in which citizenship changed.

 

After that point, the account does not continue earning the regular PPF interest rate. Instead, interest is payable only at the rate applicable to a Post Office Savings Account until the account is formally closed, as per the scheme’s provisions.

 

 

If your residential status changes after opening a PPF account, it is important to inform the bank or post office where the account is maintained.

 

Failing to update the change in status could lead to operational issues at the time of maturity or withdrawal.

 

 

Apart from the restrictions on opening new accounts and extending existing ones, most other provisions remain the same for eligible NRI account holders during the original tenure.

 

For example:

 

Loans against the PPF balance remain available as per the scheme rules during the eligible period.

 

Partial withdrawals are permitted after the prescribed lock-in period, subject to the applicable conditions.

 

The account continues to earn the notified PPF interest rate until its original maturity.