Introduction: PPF for NRIs in India
The Public Provident Fund (PPF) in India is a long-standing, government-backed investment scheme. It offers a blend of attractive interest rates, tax benefits, and security, making it a popular choice among Non-Resident Indians (NRIs) for long-term savings and retirement planning.
Eligibility and Rules for NRIs
Opening and Maintaining PPF Accounts
- NRIs cannot open new PPF accounts in India. However, if an account was opened while you were a resident of India, you can continue to contribute to it until its maturity (15 years).
- Upon attaining NRI status, the continuation of contributions to the PPF account is permitted, but the extension of the account beyond its original maturity period is not allowed.
Investment Process
- Contributions to the PPF account can be made up to a maximum of ₹1.5 lakh per financial year. These can be done through NRE or NRO accounts in various forms, including online transfers, cheques, and DDs.
Tax Implications
- Contributions to PPF accounts enjoy tax exemption in India under Section 80C of the Income Tax Act. However, NRIs should also consider the tax laws in their country of residence as the interest earned might be taxable there.
Withdrawals and Maturity
Premature Withdrawals and Loans
- NRIs can make partial withdrawals from their PPF accounts starting from the 7th year of the account. Loans are also available after the 3rd year under specific conditions.
Maturity and Extension
- A PPF account matures after 15 years. NRIs must close the account upon maturity; it cannot be extended. If the account holder becomes an NRI after extending their account, they can contribute until the end of the extended period but cannot further extend the account.
Repatriation of Funds
- Upon maturity, the entire amount, including interest, can be withdrawn and credited to the NRO account. NRIs can repatriate the maturity amount up to USD 1 million per financial year from their NRO account under the RBI's Liberalized Remittance Scheme (LRS).
Closure Procedures
- To close a PPF account, NRIs should visit the bank or post office in India where the account is held and submit the necessary documentation, including a PPF withdrawal form and identity proof.
Alternatives to PPF for NRIs
- NRIs looking for investment options beyond PPF can explore avenues like NRE/NRO/FCNR fixed deposits, mutual funds, real estate, and trading in Indian stock exchanges.
Conclusion: PPF - A Wise Investment Choice for NRIs
While NRIs cannot open new PPF accounts, those with existing accounts can benefit from this safe and tax-efficient investment vehicle. It's an excellent option for long-term savings, offering assured returns and significant tax benefits. However, NRIs should stay updated on the regulations and tax implications in both India and their country of residence.
Arnav is a dedicated product leader with a passion for finance and fintech. He graduated from IIT Bombay and IIM Calcutta and heads the Product team at Vance. He has extensive experience in the financial sector, with a deep understanding of the cross-border space. In his free time, he enjoys playing the guitar, rock climbing, and training for triathlons.
