Can NRIs invest in Public Provident Fund (PPF) in India?



Last updated. 23rd April, 2014

Public Provident Fund (PPF) is one the best investment options in India which provides risk free & tax free returns (8-10%).

But, Can NRIs take benefit of this investment option? Let’s discuss in detail.

1. I am an NRI. Can I open NEW PPF Account?

No. an NRI can’t open a new PPF Account in India. However, he can maintain the existing PPF Account opened when he/she was resident.

2. I opened PPF account when I was in India but now I am working outside India. Can I continue with this PPF account?

Yes. If the PPF account was opened when you were resident, then you can continue with this PPF account even after you become an NRI.

Till 2003, NRIs were not allowed to contribute amount into existing PPF accounts opened when they were resident. However, in 2003, government allowed NRIs to continue investing in existing PPF account (notification (MOF (DEA) No GSR 585 (E) dated 25.7.2003)

3. How to deposit money in PPF account?

You need to invest minimum of Rs 500 each year in PPF account otherwise it will become dormant & you will need to pay a penalty of Rs 50 per missed year of investment.

You can issue cheque from your NRE / NRO account or you can transfer funds online to your PPF Account. Read my other article on – How to transfer funds online to PPF Account.

4. Can I close my existing PPF account, when I become an NRI?

No. PPF account can’t be closed before maturity except in the event of death.

However, you can withdraw full amount at maturity or make a partial withdrawal.

5.  Should I withdraw / extend at time of maturity?

You need to withdraw the balance amount at time of maturity.

NRIs are not permitted to extend the PPF account (with contribution). However, if you donot withdraw the balance at maturity, the account

will be treated as “extended without contribution”

6. Can I transfer the PPF balance amount abroad / repatriate?

Yes. At maturity, you can withdraw the PPF balance and deposit in NRO account.  NRIs are allowed to remit /repatriate upto USD 1 million per financial year from their NRO account subject to certain procedures.

7. Do I need to pay any taxes on Interest earned or withdrawal amount?

In India, PPF fall into the category of E-E-E (Exempt-Exempt-Exempt) mode of taxation.

  • The annual investment into PPF account qualifies for a deduction under Section 80C
  • The interest earned on the PPF account every year is not taxable
  • The lump sum withdrawal at the time of maturity is not taxable

In fact, if you have any other taxable income in India, you can claim deduction of upto Rs 100000 for your investment in PPF under Section 80C of income Tax Act.

Tax abroad in your country of Residence

While PPF income doesn’t attract any tax in India, you might need to pay tax in your foreign country.  You might need to include / declare the income from PPF in your country of residence income tax return.

As per US tax laws, this interest income will be taxable and you can choose to pay tax each year or defer it till withdrawal.

For UAE NRIs, the situation will be different as there is no personal Income tax there.

  • NRIs can’t open NEW PPF Account.
  • But, if they have existing PPF account they can contribute money via their NRE/NRO account.
  • Interest earned is tax free in India but might be taxable in country of residence.

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