Navigating PPF for NRIs (2024)

FAQs

Is PPF good for NRI? ›

Key Benefits of PPF for NRIs

Even with changes in regulations, the Public Provident Fund (PPF) offers attractive advantages for NRIs seeking a safe and tax-efficient investment in India. Here are the core benefits: Tax-Free Interest: A major draw is the tax exemption on interest earned.

Individuals who opened PPF accounts while residents of India and later became NRIs can continue investing in the same accounts until maturity. Thus, even after transitioning to NRI status, they can sustain contributions and accrue interest until the account reaches its maturity date.

For an NRI to close a PPF account, he or she must visit the bank branch in India. At the branch, they need to submit the PPF withdrawal form, ID proof copy, passbook and cancelled cheque. Hence, if they are visiting India, they can go directly to the bank and complete the formalities.

How to Maximize PPF Returns? Invest before the 5th of every month. PPF interest is calculated on the lowest balance between the 5th and last day of every month. For instance, if you deposit Rs 10,000 on 2nd Jan and another Rs 10,000 on 15th Jan, the interest will only be calculated on Rs 10,000 and not Rs 20,000.

But as you opened your PPF account before you headed Abroad, the account will remain active. The accumulated amount will also earn interest. Once you are back in India, and turn into Resident in taxation terms, you will be allowed to continue investment. Kindly note that the tenure of 15 years will remain same.

After PPF, ELSS is one of the most tax friendly 80C investment options. ELSS capital gains of up to Rs 1 lakh in a financial year are tax free. Capital gains in excess of Rs 1 lakh are taxed at 10%.

U.S. Tax Treatment of Indian Public Provident Fund (PPF)

The investment grows tax free in India, until it is withdrawn, but the U.S. tax rules and IRS tax treatment is different. If a U.S. person owns a PPF, they will have a U.S. tax and reporting requirement.

In case you don't pay at least the minimum deposit amount in any year of your PPF tenure, your account will get inactive. It's easy to forget about a financial instrument if you have invested in varied opportunities.

As an NRI/Person of Indian Origin (PIO)/Overseas Citizen of India (OCI), you are not eligible to open a new PPF account. However, you can continue to make fresh contributions to your existing investment or prematurely close it (if you have held it for five or more years).

Can I transfer money from NRE account to PPF account? ›

An NRI cannot make any new investment to a PPF viz. any investment must be in an existing PPF, which they opened while they were Indian residents. For an existing PPF, they may keep contributing to it on a non-repatriable basis till the maturity of the PPF.

On maturity, you can withdraw the entire corpus. For this, you will have to submit a duly filled Form C at the bank branch or post office where you have your PPF account. The PPF will be terminated thereafter and the corpus will be credited to your bank account. Some banks have also replaced Form C with Form 2.

You may partly withdraw up to 50% of the amount in your PPF account at the end of the fourth year before the year the withdrawal is made. If the amount in your PPF account at the end of 2021 (the fourth year before 2023) were ₹5,00,000, you would be allowed to withdraw up to ₹2,50,000 (50% of ₹5,00,000).

According to the PPF scheme, the interest in the PPF account is calculated based on the lowest balance in the PPF account between the 5th of every month and at the end of month. So if PPF investors are making a lumpsum payment for the financial year, it must be done before April 5 to maximise the earnings.

Can I pay more than 1.5 lakh in PPF? The maximum amount that you can invest in your PPF account in a financial year is Rs. 1.5 lakh. Any amount beyond that will not earn any earning interest and would not be eligible for deductions under Section 80C of the Income Tax Act, 1961.

Any Indian citizen can invest in PPF. One citizen can have only one PPF account unless the second account is in the name of a minor. NRIs and HUFs are not eligible to open a PPF account.

U.S. Tax Treatment of Indian Public Provident Fund (PPF)

The investment grows tax free in India, until it is withdrawn, but the U.S. tax rules and IRS tax treatment is different. If a U.S. person owns a PPF, they will have a U.S. tax and reporting requirement.

Both LIC Jeevan Labh and PPF offer the scope of increasing one's savings corpus. While your PPF account is a traditional savings scheme with a high-interest rate, LIC Jeevan Labh offers life cover with additional returns as a means for increased earnings. However, the rate of return for LIC policies is lower.

In the case of children, parents are advised to open a PPF account as soon as the kid is born. Adults who have completed their schooling but do not have a PPF account should open one as soon as they start their first job.