NRIs holding PPF account may be interested to know this information

Why PPF find a place in the investment portfolio of every investor? Simple, the investment in PPF is eligible for deduction u/s 80C of the Income Tax Act (means, if you invest in PPF, you pay less tax), interest earned is exempt from tax (unlike, bank Fixed Deposit interest which is subject to tax), while withdrawing the entire amount is tax exempt (this means, the entire cycle of investment is tax exempt)

Can everyone invest in PPF?

Individuals who are residents in India can open PPF Account (NRI can’t open PPF account!).

Can NRIs continue to hold PPF account?

Those who opened PPF account, when they were resident in India, but became NRI later, are eligible to hold the account. However, an amendment is done to the rules of PPF vide Notification No. GSR 1237(E) dated 3rd October 2017 and it reads as under –

Provided that if a resident who opened an account under this scheme, subsequently 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 the Post Office Saving Account up to the last day of the month preceding the month in which the account is actually closed”. [F. No. 1/10/2016-NS.II]

What does it mean? NRIs who are holding PPF account will earn lesser interest (say, 4%, at current rate). So, NRI can move their investment in PPF to other lucrative investment options. Once they come back and become residents, they can re-open the account.

Similar amendments are done in case of National Savings Certificate (VIII Issue) also.

Please note that there is no violation if one continues to hold PPF account, even if they become NRIs.

 

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About B E Kumar Prasad

B E Kumar Prasad
He is a Practicing Chartered Accountant in Bengaluru, India. He has 25+ years of experience in income tax, business setup, and NRI matters. He is also an Insolvency Professional and Registered Valuer (F&SA).Prasad welcomes your comments and questions. Please email him at [email protected]

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Naresh Mody
Naresh Mody
2021 years ago

However, if a person has taken a citizenship of another country, whether he needs to close the account or can hold the same till maturity. Please advise as one of my relative has recently became citizen of Australia and he has PPF account which in not operative.

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