The Public Provident Fund (PPF) is a popular long-term savings scheme in India, offering tax benefits and guaranteed returns. While NRIs (Non-Resident Indians) are often interested in maintaining or opening a PPF account, there are specific rules and restrictions that apply to them. Here’s a detailed guide on PPF accounts for NRIs, covering eligibility, rules, taxation, and alternatives.

Can NRIs Open a New PPF Account?

No, NRIs are not allowed to open a new PPF account as per the amended Public Provident Fund Scheme, 1968, and subsequent notifications by the Government of India. This restriction applies even if the individual was a resident Indian before acquiring NRI status.

What Happens to an Existing PPF Account After Becoming an NRI?

If an individual already has a ppf account for nri​ and later becomes an NRI, they are allowed to:

• Continue the account till maturity (15 years from the opening date).
• Make contributions to the existing account until maturity, subject to certain conditions.

Key Points:

1. Contributions must be made from an NRE (Non-Resident External) or NRO (Non-Resident Ordinary) account.
2. The account cannot be extended beyond the initial maturity period of 15 years.

Rules for NRIs Regarding PPF Accounts

1. No Account Extension:
   • Unlike resident Indians, NRIs cannot extend their PPF account in blocks of 5 years after the maturity period.
2. Contribution Limits:
   • NRIs can contribute up to ₹1.5 lakh per financial year to their existing PPF account
3. Interest Earnings
   • NRIs continue to earn interest on their PPF balance at the prevailing rates.
   • Current interest rates for PPF are revised quarterly by the Government of India.
4. Repatriation of Funds:
   • The maturity proceeds can be repatriated outside India, subject to FEMA (Foreign Exchange Management Act) guidelines.

Taxation on PPF for NRIs

1. In India:
   • The interest earned on PPF is tax-free in India under Section 10(11) of the Income Tax Act, 1961.
2. In Country of Residence:
   • NRIs may have to declare PPF interest in their country of residence, depending on local tax laws.
   • Double Taxation Avoidance Agreement (DTAA) provisions may provide relief from double taxation.

How to Manage PPF Account as an NRI

• Continue Contributions: If you already have a PPF account, you can continue contributing until maturity.
• Monitor Interest Rates: Keep track of interest rate changes to assess returns.
• Withdraw Maturity Proceeds: Ensure to claim the maturity proceeds promptly after the 15-year period, as no extensions are allowed.

Alternatives to PPF for NRIs

Since NRIs cannot open a new PPF account, they can explore these alternatives:

1. NPS (National Pension System):
   • Offers long-term retirement savings with tax benefits under Section 80C.
   • Accessible to NRIs with an Indian bank account.
2. Fixed Deposits (NRE/NRO):
   • NRE fixed deposits provide tax-free interest, while NRO deposits are taxable in India.
3. Mutual Funds:
   • NRIs can invest in debt or equity mutual funds to achieve their financial goals.
4. ULIPs (Unit Linked Insurance Plans):
   • Combines investment and insurance with tax-saving benefits.

FAQs on PPF for NRIs

1. Can NRIs close their PPF account prematurely?

Yes, NRIs can close their PPF account prematurely after completing 5 years, but only under specific circumstances like higher education or medical emergencies.

2. Is the interest earned on PPF taxable for NRIs?

• In India: No, it is tax-free.
• Abroad: It depends on the tax laws of the NRI’s country of residence.

3. What happens if an NRI contributes to a new PPF account?

Such contributions are not allowed. If made inadvertently, they may be reversed, and the account could be frozen.

Conclusion

The PPF scheme remains a viable investment option for NRIs who already have an account, offering tax-free returns and guaranteed safety. However, with restrictions on opening new accounts and extensions, NRIs should carefully evaluate their financial goals and explore other investment options for long-term wealth creation.

For professional assistance in managing PPF accounts, tax compliance, and exploring alternative investments, reach out to experts like Dinesh Aarjav & Associates, who specialize in NRI financial services.