A non-resident can be trapped in several doubts regarding PPF account. Certainly, it measures a big share of your hard-earned money, which you never want to give up. Being an NRI, you cannot stay tuned with every update or amendment in investment schemes. But, the one providing with NRI investment services can play the role of an assistant. He acknowledges about all amendments in the investment policies.
Being one of them, I’ m sharing amendments in the PPF account eligibility and its maintenance in India through this blog.
Can NRIs contribute to the existing PPF account?
This is the very first question that grips your mind subsequent to changing status from a resident to non-resident of India. It is an outcome of the fear to lose the invested money in the PPF account.
This fear was certain to spring up. The Department of Economic Affairs (DEA) has announced in October. It states that the one who opened this account as a resident and later, changes into a non-resident, his PPF account shall be deemed to be closed. The closure will be effective from the day he becomes a non-resident.
Later on, the DEA had to amend this policy. An office memo was released on 23rd February, 2018 in the scope of NRIs PPF a/c. However, it has a crystal clear barring message for non-residents that they cannot be able to open it.
The office memo added a little twist in it, stating that the one who opened it before becoming a non-resident can continue to run it till maturity, i.e. 15 years. But, such people won’t be able to extend it. On the flip side, the residents will have a leverage to carry on this investment in the block of five years.
What happens if an NRI open PPF account?
First and the foremost thing to consider is that this account is not meant for emigrant Indians. The DEA has decided to take a ‘U’ turn in 2017 that stuck to barring NRIs from this investment scheme. It clearly stated these norms:
- NRIs cannot open a new PPF account.
- They can maintain their existing PPF account and will continue to get the same interest rate as the citizens get.
Erstwhile, the penultimate amendment pushed several non-residents to close their account. The government was firm to release interest on it at 4%, which was less than the previous interest rate.
Why did the government introduce review of these rules between Oct., 2017 and Feb., 2018?
The good rate of return attracted Indian diaspora in abroad. They often planned to get the interest rate, which touched 7.8 % in the beginning. Also, this is the safest NRI investment plan wherein fraud probability is zero.
They opt for it as the best retirement plan. Upon serving abroad for 10 to 15 years, they think about resettlement in India and look for its extension. There were none of the schemes, apart from this, that ensured a fixed high return, unlike NPS investment, without any volatility. However, mutual funds are good to invest in. But, the interest consistently fluctuates, depending on the market stock performance of the company’s equity.
Can he maintain PPF account in India?
Now, the NRI PPF Rules, 2019 are introduced. Let’s get through what it iterates in the layman’s words:
- The PPF is a 15 years scheme.
- It can be extendable beyond 15 years in blocks of 5 years any number of times.
- But, non-residents cannot extend it beyond 15 years.
- With just INR 500, this account can be operational.
- Now, the interest rate will be subjected to review and reset every quarter.
- Partial withdrawal can be made after 7 years from this account.
- This account can be closed before maturity, but only after 5 years, under certain conditions.
- The account holder can avail a loan between 3rd and 6thfinancial year. It is simply because there is an option of partial withdrawal from 7th
Can a non-resident claim for PPF deduction?
The amount you invest in this scheme is taxable under Section 80C. But, you can earn tax-free returns on maturity, but only if it matures while being in India. This is why it is the foremost choice of expats from India.
If it attains maturity when you’re abroad, the rule of taxability will differ. You might have to declare the amount in the current residence country. The country will levy appropriate tax on it. In short, this scheme is tax free under certain terms and conditions.
