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.