PPF for NRI

The question is whether PPF exists for NRIs, and if it does, what form does it take? This is a query that has long perplexed investors and experts alike. The primary reason is the ambiguity of information surrounding this topic, making it extremely difficult for NRIs to make a reasoned decision. As such, an NRI cannot invest in PPF. However, if people with current NRI status, opened a PPF account before they got the NRI status, they can continue with the account until maturity.

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PPF Calculator for NRI

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PPF Rules for NRI

The rules that govern PPF for NRI are given below. They are succinct and explained in layperson terms for everyone to understand:

An NRI does not have the authority to open a PPF account in India
However, a resident Indian can open a PPF account and become an NRI at a later date. Such a person can continue to hold the account till it matures. More details about maturity follow in subsequent sections.
On maturity, the NRI has a compulsion to close the PPF account. There are no exemptions.
Therefore, it follows from the point above that an NRI cannot extend a PPF account. They cannot let it lie either. The only available alternative is the closure of the account.
In case the NRI does not comply with the rules above and leaves the account open, then no interest will be payable.
In case the NRI keeps up continuous payments to the PPF without notifying their bank of their amended status (viz. from a resident Indian to a non-resident Indian). No interest will be payable on contributions after maturity. All banks monitor KYC documents regularly, informing them of the customer's residence status.

PPF NRI: Account Maturity

As has found mention above, an NRI cannot open a PPF in India. However, there are exemptions for those NRIs who opened a PPF while they were resident Indians and then decided to change their NRI status. Quite simply, if a person had opened their PPF account as a resident Indian, they can hold it till maturity irrespective of any change in their residency status. The maturity for a standard PPF is fifteen years.

There is another possibility as well. There is a chance that a resident may have extended the PPF account after maturity. This is allowed in blocks of five years after the maturity of the PPF. Note that the extension can be done as a resident Indian only. After the extension, if the person then changes their status and becomes an NRI, they can keep holding the account till the new time of maturity.

PPF Account for NRI and its Extension

This section elaborates further on what was touched on in the last section. An Indian, who is still a resident in the country, has the opportunity to extend the PPF in blocks of five years to an indefinite period. In effect, this makes PPF a fund where the holder can push back the maturity as much as they like. A non-resident Indian loses this benefit and must therefore contend with the fixed maturity period of fifteen years for a PPF.

However, consider that a resident Indian has extended their PPF, and within the extension period, they choose to become an NRI. Current laws allow the NRI to keep subscribed to that account till the time of its new maturity. After the new maturity period is reached, as an NRI, the person cannot extend the PPF further.

To illustrate the point, consider a resident Indian who invests in a PPF. Afterwards, that person chooses to extend the PPF for five years. During this period, for the first two years, let us assume that the person remains a resident Indian until nothing changes. However, at the end of two years, they decide to settle abroad in another country, and therefore their status changes to that of an NRI. In such a case, the person can keep holding the PPF for the remaining three years of the five years. This is the period for which the extended maturity is valid. The subscription cannot be extended beyond this period.

PPF Account NRI and Withdrawals

There are two major types of withdrawals allowed for a PPF. They can be complete withdrawal at maturity or partial withdrawals. One needs to understand withdrawal under both these terms.

For non-resident Indians, special rules apply for partial withdrawals. Withdrawals are allowed from the seventh year onwards. They go up to the fifteenth year, which is the year of maturity. There are special conditions for such withdrawals. Loans are possible from the third year onwards.

A complete withdrawal, on the other hand, is only available on maturity. Both partial withdrawals and complete withdrawal are ultimately deposited to the NRI’s NRO (non-resident ordinary) account. This article also brings this important point for readers to note that while partial withdrawals have prohibitions on repatriation, maturity proceeds may be repatriated.

Public Provident Fund for NRI and Taxation

The Public Provident Fund is completely tax-free. That is why it is such a popular mode of investment in India. The returns generated from the funds are not taxable. However, once the PPF reaches maturity, an NRI does not have any option other than to close the account. In such a case, one must withdraw the proceeds on maturity in full and close the account. The credit of this amount happens to the NRO account, as mentioned above. One needs to pay taxes on the NRO account as per the prevalent NRO account rules of the time.

Can NRI invest in PPF?

So, when all is said and done, one must go back to the basic questions and answer them so that they serve as a ready reckoner for the readers. To the question asked here, the answer is that an NRI can invest in PPF, but with the following caveats:

An NRI cannot make any new investment to a PPF viz. any investment must be in an existing PPF, which they opened while they were Indian residents.
For an existing PPF, they may keep contributing to it on a non-repatriable basis till the maturity of the PPF.

Thus, there is a nuance to the answer to this question, which the article hopes its readers will appreciate.

Can NRI open a PPF Account?

Unfortunately, no. An NRI cannot open a PPF account in India. The only thing an NRI can do is maintain a PPF account till maturity. The maturity can be its ordinary maturity of fifteen years or its extended maturity.

Can NRI have PPF Account in India?

Yes, an NRI can have a PPF account in India. However, the PPF account must have been opened while the person was still a resident of India. An NRI can only have a PPF account if they opened it as an Indian resident and prior to becoming an NRI.

What are the alternatives to PPF for NRIs?

However, apart from PPF, NRIs have multiple options to invest in. Some of them are given below:

Fixed Deposits – There are choices like NRE, NRO and FCNR fixed deposits.
Direct Equity – This is a direct investment into the stock market using a DEMAT account, Portfolio Investment Scheme, or the NRE/NRO account.
Mutual Funds – There are many options available covering the entire spectrum from debt to equity.
Real Estate – An NRI can always invest in owning property in India. This is an area of significant appreciation.
National Pension Schemes – This is a government scheme that provides debt and equity options. Additionally, it gives tax benefits.
Unit Linked Insurance Plan – ULIP, as it is also known, are a combination of investment and insurance. They provide both growth and cover.
Government Securities – These are treasury bonds issued by the government of India, in which an NRI can invest.

Conclusion

Having looked at all the segments and some of the questions, it is hoped that the reader will have a better idea of where they stand with Public Provident Fund and Non-Resident Indians. The article covered maturity, extension, withdrawals, taxations, and FAQs in a way so as to remove any possible ambiguity. It is now clear that an NRI cannot open or extend a PPF, but can only contribute to an existing fund, which they opened as a non-resident Indian.

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