Can an NRI invest in Public Provident Fund?

A Public Provident Fund or PPF is one of the most attractive savings avenues available in the market for those who are looking at accumulating funds systematically, with growth, on a long-term basis. It is a very secure choice as this fund is guaranteed by the Government of India. The main highlight of this investment is that it falls under the Exempt-Exempt-Exempt category, which means:

• the amount deposited every year,
• the final amount withdrawn at the time of maturity, and
• the interest gained over the years

are all exempt from taxation.

In addition, under the old tax regime, the amount deposited each year can be availed as a tax saving deduction under section 80C. The amount of eligible investment or expenditure as specified is fully allowed for deduction subject to the limit of INR 1.5 lakh.

The term of maturity of PPF is 15 years with a mandatory requirement to deposit into the fund at least once in each year. The minimum investment amount shall be INR 500 with a maximum deposit of INR 1.5 lakhs each year.

It is clear from the above terms as to why the PPF remains to be a very popular savings-cum-tax-saving instrument. For the same reason, NRIs often explore the option as well.

But can an NRI open a PPF account?

The answer is No. Only a resident, Indian citizen can open a PPF account under The Public Provident Fund Scheme, 1968.

Can an NRI continue investing in an existing PPF account?

Yes. a person who held a PPF account while he was a resident citizen can continue to maintain the PPF account even after becoming an NRI subsequently, until its maturity. Such NRI can continue to add funds into the PPF account until maturity on a non-repatriation basis. Further, tax deduction under 80C is also available. Non-repatriation basis means that he cannot transfer the amounts in this fund back to his country of his residence or get it converted to any foreign currency. This specifically applies to the partial withdrawal of PPF, which is allowed after completion of the first five years. Such partially withdrawn amount has to be spent by him solely in India. The maturity proceeds, however, can be credited into his NRO account and can be repatriated outside India.

Also, while the account holders who are Indian citizens are allowed to extend the term of deposit by blocks of 5 years upon completion of the first 15 years, this option is not available to an NRI. NRIs have to close and withdraw when the period of 15 years is over. Please note that the amount withdrawn is exempted from taxation in India.

It is imperative to note that upon change in residential status to an NRI, you are required to immediately intimate the status change to the bank or post office where you opened the account.