PPF for NRI has been a topic that has constantly drilled brains. There is a lot of vagueness around the basic information that needs to be communicated to NRIs. For instance, what happens after your PPF Account matures? Can you keep it as it is without contributions? What is the rate of interest or is there any taxation that follows? There are many loose ends prevailing around the NRI PPF Account which needs closure. In this article, we will take up the most common aspects around PPF for NRI: Maturity of the Account, Extension of the PPF Account, Withdrawals and the Taxation on the PPF Account for an NRI, with answers to the questions that can’t be found easily on the web as there are no notifications for this information and it is underlying amidst word of mouth. We have verified the information from National Savings Institute (NSI).
PPF for NRI: Latest Guidelines 2021 Overview
- An NRI can’t open a PPF Account in India
- A Resident Indian who opens a PPF Account and becomes an NRI later can continue to subscribe to the account till maturity (15 years)
- It is mandatory for the NRI to close the PPF Account after maturity
- An NRI can’t extend their PPF Account or let it as it is. Closing the account is the only option
- If the account is not closed and left as it is, then no interest shall be payable
- If an NRI keeps on contributing to the PPF Account without informing the bank about the change in his/her Residential Status after maturity then no interest shall be payable on the contributions post maturity (Your status can be traced using regular KYC from banks)
Source: National Savings Institute (NSI)
PPF for NRI: Maturity of Account
As an NRI, you can’t open a PPF Account in India. However, if you had opened a PPF Account while you were a Resident Indian then in that case you can continue to subscribe to it till maturity (15 years). Now, there’s another case where residents who already have an extended PPF Account (you can extend your PPF Account in blocks of 5 years after maturity) become an NRI. In such a case, the NRI can continue to subscribe to the account till the new maturity.
PPF for NRI: Extension of Account
A Resident Indian can extend her/his PPF Account in blocks of 5 years after maturity for an indefinite period. As an NRI, you can’t extend your PPF Account beyond maturity (15 years). However, there are cases where Residents who have extended their PPF Account become an NRI during the extended period. In such cases, the NRI can keep subscribing to the account till the extended period of maturity. (S)he won’t be able to extend the account after that. (e.g. If you have extended your PPF Account for 5 years and become an NRI during the 3rd year of extension, you can only subscribe to the account for the next 2 years till the extended maturity is valid)
PPF for NRI: Withdrawals
Now the withdrawals can be understood in terms of partial withdrawal and complete withdrawal at maturity. Partial Withdrawals for NRIs are allowed from year 7 of the initial maturity period of 15 years but there are certain conditions attached to it. You can even get loans after the 3rd year. However, a complete withdrawal is only available at maturity. Both the partial and complete withdrawals are credited to your NRO Account. Partial withdrawals can’t be repatriated while the maturity proceeds can be repatriated abroad.
PPF for NRI: Taxation
Now, we all know that PPF for NRI is a tax-free mode of investment in India where you don’t need to pay any taxes on the returns generated. After your PPF Account reaches its maturity, you have only one option that is to withdraw the entire amount and close the account. The maturity proceeds will be transferred to your NRO Account and that will be taxable as per the NRO Account Tax rules.
Understanding the NRI Public Provident Fund Account
In the segments above, we discussed the essential aspects around Maturity, Extension, Withdrawals and Taxation of the NRI PPF Account. The previous guidelines had been so confusing because there is a lack of proper communication channels and notifications focused specifically for NRIs which made us contact NSI and get the updated information for you. In the next segment, let’s take a look at some situational questions that NRIs have asked us from all around the world and their answers:
Frequently Asked Questions by NRIs
In such a case, since the person becomes an OCI, he can continue to subscribe to the PPF Account till maturity (15 years) as the rules of PPF for OCI is same as the rules of PPF for NRI.
No. The PPF Account of a Resident who became an NRI before maturity can’t be extended beyond 15 years. It is mandatory for the NRI to close the account and withdraw the money.
Yes. Firstly, it is mandatory to inform the bank about the change in your residential within a month of such a change. Therefore, your daughter needs to inform the bank. Since she is an NRI now, she would also need to convert her resident savings account into an NRO Account. In the meanwhile, she can use the resident account for PPF contributions. The rate of interest will be unchanged.
No. In this case, the NRI won’t be able to extend the account nor any interest will be payable after maturity. You need to close the account.
Firstly, you need to inform the bank about the change in your residential status as soon as you can. It is mandatory and essential. As far as the interest rates are concerned, the rates remain the same. You will keep on earning interest at the prevalent rate till maturity.
Yes. There was a notification the guidelines that mentioned a 4% interest rate on PPF for NRIs but that notification has been in abeyance (temporarily dismissed) since 2018. Therefore, an NRI will keep on earning interest at the prevalent rate.
No. You can’t keep the money in the account as it is mandatory for NRIs to close their accounts at maturity. No interest shall be payable after maturity.
No. You can’t open a PPF Account in India as the guidelines for PPF are the same for NRIs and OCIs.
No. An NRI can’t open a PPF Account. NRIs aren’t eligible for opening one, even if they are doing it for a minor. If the minor is also an NRI, he is too not eligible for a PPF account. If the minor is a Resident Indian, he/she needs a Resident Indian Guardian to open his/her PPF Account.
No. A seafarer can’t open a PPF Account as they are considered at par with NRIs.
How to close PPF Account for NRI?
The process to close a PPF Account for NRI is the same as it is for Resident Indians. You need to visit the bank branch in India and submit the withdrawal form, ID Proof, Passbook and cancelled cheque. The money will be received in the NRO Account of the NRI. Now, if you can’t visit India personally then you need to provide an authorization letter for the same. The steps for withdrawal in this case are:
- Download and fill PPF withdrawal form
- Attach ID and address Proof along with a cancelled cheque of NRO Account
- Write a letter of authorization mentioning that you will not be able to visit the bank and your representative will be closing the account for you.
- Send all the documents to your representative
- (S)he will need to get the documents attested by the bank manager where you have your NRO Account
- The representative needs to visit the bank branch finally for the PPF withdrawal process
- You will get the proceeds credited to your NRO Account
PPF Calculator: Calculate your Returns
The PPF Calculator can be understood as a platform where you can learn about the returns that you will generate as per the prevalent PPF interest rate when your account matures. For getting an overview of how PPF operates and how you can maximize your returns by utilizing the tax benefits that it offers, contact our expert using the button at the end of the article.
NRI PPF Account: Getting Expert Assistance
There are a lot of gaps that need to be filled. The communication isn’t aligned and there isn’t much written evidence for the PPF guidelines that you can find on the web. We at SBNRI understand your struggle and confusion and that’s why we contacted NSI personally and gathered all the information for you. Also, we have dedicated experts who listen to your queries or service requirements and resolve them with end to end execution wherever required. You can connect with our expert directly on WhatsApp using the button below. Also, visit our blog and Youtube Channel for more details.