A million dollar question – Can NRI invest in PPF in India? I have my good friend Kumar Siddharth posted in the United States asking me this many times so I thought I might as well scribble something here.
NO, you cannot if you are an NRI ALREADY.
Now, what does this mean?
Can NRI invest in PPF or Not?
Well, the Government has created a lot of confusion before it could be understood. In Sept 2017, a circular was issued and NRIs were forbidden. Result – Many NRIs rushed to close and ironically banks also closed!
Finally, another circular in FEB 2018 cleared the issue. (We tracked how these circulars created confusion. Check this post)
In final, if you have a PPF (before becoming NRI), you can continue till maturity. You cannot apply for an extension. If you do not have a PPF account and you are an already NRI, sorry the bus has left. You cannot open a PPF account.
The Public Provident Fund is one of the best and not to be missed fixed income instrument that a person should invest in India. For those who are not aware, a PPF is a 15 years investment vehicle in which you need to invest a minimum Rs 500 and a maximum Rs 1.5 lakh each year. Since it is run by the government with the purpose of providing income security to workers, it is very safe, almost risk-free. (Complete details on PPF)
The rate of interest currently is 8% effective from April 1st 2019. Now since the product is tax-free and risk-free, who would not want to go for it? So let’s check – can NRI invest in PPF account?
UPDATE on Can NRI invest in PPF on 26/02/2018
The rules have changed a lot. Read the latest status here.
Can NRI invest in PPF?
The simple answer is NO, as of today an NRI cannot open an account and start pumping in money. That might not sound so palatable but that is how it is.
But there must be many NRIs that would have opened PPF accounts before they became NRIs ? What about them ? Can those NRIs invest in the PPF account each year ? There is a bit of history behind this.
Prior to 2003, even if you had a PPF account and became an NRI subsequently, you could not park any money in this account. The government prohibited investments into this product for you.
But in 2003, via a notification, the government allowed existing NRIs to continue investing in the Public Provident Fund if they already had an account. So as it stands today, if you already have a PPF account before you became an NRI you can continue to invest Rs 1 lakh into it till this matures.
In short, if you want to open a new PPF account and if you are an NRI, it is not possible to do so. But if you already have an existing PPF account, the answer to the question Can NRI continue to invest in PPF is Yes.
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Can NRI invest in PPF? Best Practices – things to note
1. Use NRO/NRO account for investments – It is important to note that if you are an NRI, you cannot transact with your savings account you might have had in India – what you need is an NRE (Non Resident External) or NRO (Non Resident Ordinary) account. So an NRI is expected to invest via any of these accounts into the PPF account each year.
2. NRI cannot extend PPF account – A PPF account can actually be extended for 5 years after its maturity. However, this is not allowed for an NRI and he/she will have to withdraw the entire deposit on maturity. Remember that if you forget to withdraw, the PPF account will remain open, will earn interest and you will not be expected to invest even the minimum Rs 500 in it.
3. What if you do not invest each year ? – If you already have an account and have not been investing in it, then your account would have become dormant by now. You can obviously revive it by paying Rs 500 for each year that you did not invest for plus a penalty of Rs 50 – that is a pittance for NRIs ! I think it would be a blunder not to use the PPF account for investing your money and let it become dormant.
4. Account opened after becoming a NRI ? – Can NRI invest in PPF after become an NRI?Well this is actually not allowed ! If you goofed up or played smart and ended up opening the account after you became a NRI, then you need to close this as soon as possible. It is legally not the right way to invest in India.
6. NRIs are subject to currency risk – If you keep continuing to invest in the PPF for say 15 years but at the time of maturity the rupee has fallen significantly, then you could potentially be looking at a depleted PPF corpus. You need to be aware that you are carrying this risk but can wait out by using the PPF extension block of 5 years and take your maturity value at a later and better time.
7. Can NRIs take the money back to their country of residence ? Yes, the government of India allows USD 1 million per year to be repatriated each year by NRIs. What you can do is park the PPF maturity proceeds in the NRO account and from there repatriate the money to your US dollar accounts.
8. Taxation – The taxation part of PPF depends on which country you reside in. In the US, the interest value will be taxable as the US laws do not recognize PPF as a retirement vehicle. Please consult a local tax expert to clarify your position.
I hope the above has helped some of you to clear the cobwebs on Can NRI invest in PPF account in India. If you have any more questions, please feel free to ask them in the comments sections and I will be more than happy to answer. And please forward this to your NRI friends who you think might not be aware of these caveats.
Thanks Radhey for the intricate details about PPF 🙂
Tere pass hain kya PPF account ?
Very good explanation, liked the best practices. With many banks offering attractive rates on NRI FD’s I guess NRI’s would be better off investing in FDs.
You mean NRI FDs or ordinary FDs ?
Yes I meant NRI FDs, most bank offer interest in the range of 9 – 9.50 % for 1 year and above.
Hi,
very usefull information. become an NRI, missed to open the PPF a/c earlier itself. could you plesae tell me what are the other instruments to invest for NRI? which one is best for long term?
How long did you mean ?
@Vijay,
You can look at FD’s as a safe bet. If you want to take some risk then you can invest in MF for a long time.
Good one. Thanks for clarifying on the continuation of PPF account investment…
Glad you liked it Kunal.
Moved abroad in Aug 2008. Opened PPF account in Dec 08 before completing 182 days. However has NRI status for FY Apr 08 – March 09 since spent the next 3 months abroad (jan – mar 09). Is it ok to maintain the PPF accounr or does the PPF Account need to be closed? Thanks
@Smitha,
Are you contributing yearly to PPF? Do you know if you miss a year you need to pay a penalty to renew it. Do you have plans to come back to India?
Don’t close it please – it is still one of the best ways to invest in fixed income instruments. Put in 1 lakh each year.
Hi,
In the current scheme of things, I would advise my clients to invest into 10 year NRE FDs which are quarterly compounding and hence lock in the interest rates for next 10 years. The returns would be more than PPF, plus the limit of 100K is not applicable in FDs.
If NRE FDs were not available, i would have definitely gone for PPF option.
Regards
Banyan Financial Advisors
I would agree BFA.
Many thanks for the useful information,
please also let me know about the consequences if one has opened a PPF account
after becoming NRI and still continuing to invest in the same ??
Regards
It is not allowed legally.I am not sure about the consequences but the first that comes to mind is that you will not earn the interest and your principal will simply be returned to you. So that would not be a great thing to have happened.
I recommend to do the right thing and play by the rules.
Hi,
I did find a loophole in opening PPF even whe you are a NRI.
Instead of showing your passport, you can show your driving licence for opening the PPF account.
So, to be honest, i don’t see any security checks to see tif you are a NRI or not.
Regards,
Is it ? I guess they break the rules to get your money ! But the onus is also on the investor to play by the rules – when the law catches up, one cannot blame the authorities for doing the wrong thing.
Do NRIs. Enjoy deduction under 80 c by deposit in PPF? Thanks
Is section 80 c deposit in existing PPF account applicable to NRIs? Please help me by clarifying this point. Thanks
I am tempted to answer no but depends on circumstances.
I don’t think the answer is as simple as it could be.
http://www.thehindubusinessline.in/bline/blnri/exp-rbi.htm gives different view and says you cannot put money after becoming NRI!
I am not sure which one is true. and reference from RBI or Bank?
Let me check on this.
I will be moving in April to US.Have not received visa or other travel related documents yet.
Can I open a PPF account in March?
Hi, the thread is very interesting to follow up . I have a question that i got my australian passport in 2010 and i moved bak to india in 2011 . So do i need to close my nre accounts and moreover i transfer my overseas money into the acxount wen i need it over here . Please help me
@Tushki,
If you don’t plan to go abroad in future then you can close your NRE account.
I like to know that father can deposit money for nri daughter till maturietyie 15+5 years,she had already opened ppf accont much befor leaving india , money canbe drawn on maturity or father’sAC?
in CASE DEPENDENT VISA ie NOT TO BE TERMED AS NRI, there should not be any problem for my daughter presently in H4 non wokring to continue with ppf
Hi Wealth Wisher,
Good article on PPF, but i have some more queries… My background is – I just moved out of India with my PPF account open since more than a decade.
1. From what you have written, the law on extension is not clear. Point 6 on currency risk says I can extend the 5 year block and point 2 says NRI can’t extend. Currently, I’m in the 18th year of my PPF (i.e 3rd year of the extension). So, will I have to close my PPF at the end of 20th year or I can go on extending it by block of 5 years?
2. Can I use the investment in PPF to claim deduction u/s 80C for the taxable income earned in India?
Regards,
Ravi
can i invest 1 lakh rupee in my ppf account and 1 lakh also in my wife’s ppf account
@Parag,
Yes you can invest but tax benefit you would get only for Rs. 1 lakh.
If your wife is working then she can get tax exemption too.
Rakesh
My daughter, who is 18, became a US citizen few months ago and went to US for Bachelors degree. She has a PPF account which was opened 10 years ago. I have been contributing to her account all these years. She does not earn money in US and does not have NRO/NRE account. Can I continue investing in her account till the maturity date? Thank you for your reply.
@Murthy,
It would be wise to continue until 15 years and then close the account.
I am holding nri account, but I am staying in india and work on ships so stay away for more than 183 days out of country and maintain my NRI account to avoid tax. Can I open an NRI account?
@Rajesh,
I think you meant opening a PPF A/c. Also are you staying away for more than 183 days in a financial year (Apr-Mar). An NRI cannot invest in PPF but it would be better to check with SBI bank. If you are net savvy you can call ICICI bank and check with them too. You can now operate a PPF A/c with ICICI.
Hi,
I opened a PPF account in India in 2009 and recently migrated to Australia on permanent residence.
I want to close my PPF account now, can I do that.
Thanks,
Jyotsna
I have one question:
Can the PPF maturity amount be deposited in to NRE account?
I opened PPF a/c long before and extended for 5 years which is due to end in mar 2016. I became NRI after extension. in all probability i will become resident again before mar 2016. can i extend for another 5 years after mar 2016.
Please let me know
I started PPF account in the month of May 2014 then i got job abroad in the month of June 2014, so can i continue my ppf or close it?
I am working in saudi arabia last 5 years, can i open PPF account in india, if not can i open PPF to my son & daughter.
Hi
I was in US from 1 APR 14 to 17 OCT 14 (>182 Days). and Returned to india. So for this Finical Year 2014-15 My Tax filing Status will be NRI. Right??. And Can I open PPF account now in india to save Tax before 31 March 15.
Your explanation of the PPF A/C for NRI is very good. However, i could not find answer to my problem. I was maintaining PPF A/C while i was an Indian Resident. Recently i have become an NRI. I understand that i can continue to contribute to this PPF account from my rental income from property held in India before becoming an NRI till maturity of the PPF A/C. The A/C is also nearing maturity. I understand that the closure proceeds of the PPF A?C on maturity can be deposited into NRO account from where it can be repatriated to my country of residence Singapore after following certain procedures. There is no clarity on what procedures are to be followed and what are the Indian Tax Laws for such repatriation. I shall be grateful for providing clarity on these aspects.
Thanks.
Dear Mr Verma
I don’t think so there would be any problem regarding this… Just speak to your bank and ask for any specific requirement if they have any. Normally they ask for
Form A2
FEMA Declaration (Form 2)
Form 15 CA
Form 15 CB
Just arrange the docs and if the amount is under repatriation limit for that year, it will get transferred.
Great Article. I Appreciate the insight , Does anyone know if my company could locate a template Form A2 document to fill in ?
My assistant got a sample Form A2 document using this
http://goo.gl/rHE2M5Thanx Andrew for helping…
THE PPF DEPT IN NATIONAL SAVINGS INSTITUTE,MUMBAI HAVE CLARIFIED THAT AN NRI SHOULD CLOSE HIS ACCOUNT O N MATURITY i.e AFTER 15 YEARS ,NO EXTENSION IS ALLOWED.ALSO,IF A DOMESTIC RESIDENT FORGETS TO EXTEND OR CLOSE THE ACCOUNT AFTER 15 YEARS,HE CONTINUES TO EARN INTEREST WHERAS AN NRI WHOSE ACCOUNT HAS MATURED WILL NOT GET INTEREST AFTER MATURITY AS IN HUF ACCOUNTS.
That is very interesting !