Public Provident Fund rules for NRIs: Can you invest Rs 1.5 lakh/year, enjoy tax benefits?

Public Provident Fund account for NRI: Non-Resident Indians (NRIs) are not eligible to open an account under The Public Provident Fund Scheme, 1968. However, NRIs, who had invested in the PPF before becoming a non-resident during the maturity period of the account, can continue to subscribe to the Fund till its maturity on a “Non-Repatriation Basis.”

The PPF rules say: “Non-Resident Indians are not eligible to open an account under the Public Provident Fund Scheme.

“Provided that if a resident, who subsequently becomes Non Resident Indian during the currency of the maturity period prescribed under Public Provident Fund Scheme, may continue to subscribe to the Fund till its maturity on a Non Repatriation Basis.”

In other words, PPF subscribers, who become NRI before maturity of the account, can continue to subscribe to the Fund till the completion of maturity period. PPF account matures after the completion of 15 full financial years from the end of the year in which the account was opened.

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Secondly, Non-Repatriation Basis means funds in such accounts cannot be transferred back to the NRI’s country of residence, or converted to any foreign currency.

Within one month of change of citizenship or resident status, the PPF subscriber should intimate the bank or post office (whichever is applicable).

Chirag Nangia, director, Nangia Advisors LLP, wrote in Financial Express today that no interest “shall be deemed to accrue to the account from the change of such status and the account shall be deemed to be closed prematurely from that date.” One can claim the benefits of the scheme only till he/she remains an Indian citizen.

Nangia further wrote, “An NRI can continue to hold the securities which he/she had purchased as a resident Indian, even after he/she has become an NRI, on a non-repatriable basis.”

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PPF for NRIs: What the government says

In a notification dated 02-10-2017, the government had said that PPF account held by an NRI would be “deemed to be closed with effect from the day he becomes a non-resident” and keep earning the interest rate of a post office savings account. “Provided that if a resident who opened an account under this scheme, subsequently becomes a non Resident during the currency of the maturity period, the account shall be deemed to be closed with effect from the day he becomes a non-resident and interest with effect from that date shall be paid at the rate applicable to the Post Office Saving Account up to the last day of the month preceding the month in which the account is actually closed,” the notification had said.

The above notification was, however, kept in abeyance, or temporarily, dismissed via another order dated 23-02-18.