PPF for NRIs - What you need to know in 2020| North Loop Official Blog
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22 Mar 2020

PPF for NRIs - What you need to know in 2020

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What is the PPF?

Are you an NRI looking to invest in a PPF? The Public Provident Fund (PPF) is an extremely popular small saving scheme in India due to its income tax benefits, guaranteed returns and relatively low risk. Since the PPF is backed by the Indian government, many Indians use it as a way to help save for retirement or higher education while benefiting immediately from its tax benefits.

The investing minimum in a PPF account is incredibly low - just ₹100. You need to deposit a minimum of ₹500 every financial year to maintain the account, and a maximum amount of ₹1.5 lakhs.

The PPF small saving scheme emerged as a savings tool due to its tenure - the minimum tenure is 15 years, and you cannot close your PPF account before maturity. However, due to its tax-free returns and long term horizon, it is a great tool for investors planning for retirement or for higher education.

Rate of Interest -

The rate of interest or the rate applicable for PPF is currently 7.9% (as of January 2020).

PPF Scheme 1968 -

PPF scheme 1968 allowed deposits to be made in multiples of 5 and a maximum of 12 deposits were permitted in a period of 1 year.

PPF Scheme 2019 -

The Government made some tweaks for the PPF Scheme 2019 to allow deposits in multiples of ₹50.

Can NRIs invest in a PPF?

NRIs can invest in PPF if they already have an existing PPF account. Unfortunately, if you are an NRI, you cannot open a new PPF account - it can only be opened by resident Indians. However, if you have an existing account, you can continue to contribute to it.

If you were an account holder while you were still an Indian resident, you can keep contributing to the PPF until it’s 15th-year maturity, or whenever the subsequent maturity date is. Any amount you deposit towards this open PPF will still be tax-exempt under Indian income tax law, even if you are no longer an Indian resident.

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Can NRI open a PPF account?

NRIs (Non-Resident Indians) cannot open new PPF accounts. If you had an existing PPF account and then became an NRI, that is allowed. If you’re planning on becoming an NRI, but are a current Indian resident, you can still open a PPF account.

PPF rules for NRIs

If you invested in a PPF scheme before becoming an NRI, you can continue to contribute and get all the benefits of the PPF scheme. Your on-going contributions will follow the same rules that apply to Indian residents. Check out these quick notes of PPF rules for NRIs to note:
  • The interest earned is tax exempt under Section 10, while the principal qualifies for a deduction under Section 80C of the Income Tax Act, 1961.
  • Depositing more than the annual maximum - Any amount deposited beyond the ₹1.5 lakhs maximum won’t carry any interest or tax benefits, and will instead be refunded to you without interest.
  • Annual minimum - ₹500 is the minimum annual deposit that you need to make in a financial year to ensure the account stays active. You can make a maximum of 12 annual deposits every year, or do a one-time annual lump sum deposit. Deposits can be made in cash, cheque, PO, DD or through online funds transfer.
  • Monthly Deposits - To receive full interest (on the rate applicable) credit for the month, make sure your deposit is done before the 5th of every month.
  • If you’re looking to make a premature closure or withdrawal from your PPF, you can do this after the 7th year of your initial maturity period. There are many conditions for a premature closure and you can’t do a complete withdrawal until the full maturity date. You are also eligible to start getting loans after the 3rd year.
  • As an account holder, if you forgot to renew your PPF, you can do so within 1 year of the full maturity date and this can be done for 5-year blocks at a time.

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This publication is provided for general information purposes only and is not intended to cover every aspect of the topics with which it deals. It is not intended be advice. You must obtain professional advice before taking, or refraining from, any action on the basis of the content in this publication. The information in this publication does not constitute legal, tax, investment or other professional advice from North Loop or its affiliates. We make no representations, warranties or guarantees, whether express or implied, that the content in the publication is accurate, complete or up to date. All opinions expressed do not reflect the views of North Loop nor are endorsed by North Loop.