I was happily enjoying my Saturday morning while I came across an article that was posted by Melvin Joseph on Facebook. The topic that Melvin covered was about NRI PPF account and the topic surprised me a bit since it spoke on the latest notification by the Government.
The news listed the notification published by the Department of Economic Affairs from the Ministry of Finance which had issued a notice stating abeyance of NRI PPF notification.
The previous notification was released on 3rd October, 2017.
However, within four months of passing the rule, the Government has now gone ahead and revoked the rule. There can be lot of reasons why this action was taken by the government which we will discuss later in this article about NRI PPF account
First of all, let us see if a nonresident Indian can open a PPF account
Can a Non-Resident Indian (NRI) open a PPF Account?
Old Rule -According to the old rule, the answer is NO. An NRI cannot open a PPF Account. However, if a person has opened a PPF account while being the citizen of India, he can continue to invest in PPF till the end of the original term- 15 years from the start of the PPF account.
He can contribute the money to his account through NRE/NRO account also.
Before going forward, let us see what was the notification, released in 2017, all about?
NRI PPF Notification 2017
How does this NRI PPF notification 2017 impact the NRI PPF account?
What the notification meant for NRI PPF account?
The notification stated in layman terms that if a person has opened a PPF account while being the citizen of India, he/she needs to close the PPF account the day he/she becomes an NRI.
However, if NRI chooses not to close the PPF account, the rate of interest accrued on the PPF account would be reduced and will be considered at 4% per annum which is equivalent to the savings bank interest rate.
Prior to this notification, NRIs had few options available to handle their PPF account
- NRIs were never allowed to open a PPF account. But, they were allowed to maintain the account if they had opened a PPF account when they were resident of India.
- Maintaining the account meant that they were able to contribute to the PPF account through their NRI or NRO account.
- By maintaining the account, NRIs were receiving an interest equivalent to the resident Indians.(7.8% per annum)
- With this notification, all NRIs had to either close their account or if they intended to maintain their existing account will only be eligible to receive an interest rate of 4%.
Let us understand the implications of this notification with an example –
Karan is a resident Indian who maintains his PPF account from last 10 years. We have Karan’s younger brother Gopal who has been living in Australia for the past few years. His status changed to that of NRI from 1st of December 2017. In this case, Gopal will receive the similar rate of interest as Karan or any other resident Indian for his account India till 30th November 2017.
However, from 1st December’17 onwards, Gopal has 2 options:
- Either to close the PPF account; or
- To maintain the account and earn an interest rate of 4%.
PPF NRI Notification 2018 – NRI PPF Account
The latest PPF NRI notification dated 23rd February, 2018 released by Department of Economic Affairs states that –
“The undersigned is directed to refer to this Department’s notification GSR No. 1237(E) dated 03.10.2017 regarding amendment in PPF Scheme, 1968. As per the said notification, 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.”
It has now been decided to keep the said notification in abeyance till the further order in this regard.
What does this latest news about NRI PPF Account meant for NRIs?
In simple words, this means that we are going back to the same rules which were in existence before the changes that came across in October’17 –
- NRIs cannot open new PPF account
- NRIs can maintain their PPF account and get the same interest rate as given to resident Indians.
NRI PPF Rules 2019
The new rules will apply only when an NRI has an existing PPF account already. As an NRI, you will not be able to open a new account. However, all NRIs who had closed their account between October’17 and February’18 due to lower interest rates will not be able to avail the benefits of the new rules unless they become a Resident Indian.
- PPF is a 15 years scheme.
- It can be extended beyond 15 years in blocks of 5 years any number of times.
- NRIs cannot extend the PPF account beyond 15 years.
- Minimum amount required to keep the account operational is Rs. 500
- Every year, the Government used to declare the interest rates applicable in advance. Now the interest rate is reviewed and reset every quarter.
- After 7 years , the PPF account holder is eligible for partial withdrawal of funds from their PPF account
- PPF account can also be closed before maturity (after completion of 5 years) under certain conditions
- The account holder is also eligible to avail a loan between 3rd-6th financial year since from the 7th year, there is an option of partial withdrawal.
To read the complete information regarding PPF rules, limits, and maturity.
Please refer to our previous article on: SBI PPF account rules, limits and maturity
2018 Amendment rules on NRI PPF account
What interest rate will an NRI get for the period between October’17 to February’18?
My understanding is that since the government is using the word abeyance, as an NRI you will enjoy the same interest rate as resident Indians for the period between October 2017 to Feb 2018.
What is the reason for reversal of NRI PPF Amendment Rule 2017?
NRIs have been investing lot of money towards their PPF account since it was considered as the safest heaven for investment. The interest rates were as high as 7.8% backed by the Government of India. Moreover, the chances of default were very less or almost negligible.
Most NRIs used to invest in PPF account as part of their retirement plan. This was easier since one can stay in some other country for 10-15 years and then return back and become a resident Indian again and extend their PPF account.
No other security gives you such a fixed high return with any volatility. Though you can earn much higher returns in mutual funds, or equity but that again is not fixed. The returns depend on the stock markets as they vary and may go up or go down.
Reasons the Government must have revoked the Rule
I think, the government is considering giving voting power to NRIs in the coming elections. So it is natural that they can’t take such steps which will affect many NRI investors!
NRIs who have closed their accounts after the 2017 amendments must be feeling a pinch now? To open a new PPF account, they need to be Resident Indian.
Whats your view on NRI PPF account latest notification 2019? Please share.
confusednri says
March 7, 2018 at 9:16 amThanks for the update. However, do we need to inform the bank about our NRI status? Before Aadhar was made mandatory, never worried about informing the bank about the NRI status.
MoneyChai says
March 7, 2018 at 8:52 pmHi Divya
Thanks for your comment. Yes, you need to inform the Bank and change your normal account to NRE/NRO account.
If you liked the article, please share it. 🙂 🙂
MNDRS says
March 9, 2018 at 1:00 amI opened my PPF account in 1987, migrated to USA in 1997. Kept ppf account alive by putting the minimum amount. I will close the account now, but will I get the “regular” interest rate till Oct 3, 2017?
MoneyChai says
March 10, 2018 at 12:50 pmHi
As an NRI, you can not extend your ppf account after 15 years.
Milind says
April 3, 2018 at 10:32 amWhat will happen if NRI becomes resident at the time of maturity of the account?
Can he continue to maintain an Account?
Or if he will become resident after 1 year of maturity, is there any waiting period to continue without contribution?
MoneyChai says
April 4, 2018 at 2:53 pmHi Milind
Thanks for your comment.
If NRI becomes resident at the time of maturity- Yes he can maintain the account and extend it also.
NRI has to close their account after 15 years as per regulations, but the Government does not close it by itself. You need to give a request for closing of PPF account.
There is no waiting period to continue without contribution.
Please share if you liked the article. 🙂
Praveen says
May 1, 2018 at 8:22 pmExcellent guys.
This is really clear and detailed information.
I understand that,
–NRIs cannot open new PPF account
–NRIs can maintain their PPF account and get the same interest rate as given to resident Indians.
But, can we also operate it , i.e. tranferring money in to PPF through NRE account ?
Thanks.
MoneyChai says
May 9, 2018 at 7:05 pmHi Praveen
Yes you can do it, its already mentioned in the article.
sharanya says
May 28, 2018 at 7:09 pmHi ,
My Brother is a NRI. When he came to India on Jan’18, he opened a PPF account in Post office. Neither he mentioned about his NRI status ( He didn’t know this rule with NRI), nor the Person in post office mentioned anything about it. So What will happen how? What will be the interest rate?
Will there be a problem at the time of maturity?
Thanks
MoneyChai says
May 29, 2018 at 12:36 pmHi
As a rule, NRI can not open a PPF account.
2nd how is he going to transfer the money in ppf account on regular basis?
Yes there can be problem at maturity as being NRI he has opened PPF account.
What if he remains NRI at the time of Maturity?
Mayur says
July 15, 2018 at 1:53 amThank you for the update.
1) So do we need to change the status of the resident PPF account to NRO PPF account after becoming NRI?
2) Also, as per article, if you leave the account unattended after maturity then for NRI it can get automatically extended and we can get same rate as resident indian . Can you please confirm ? https://timesofindia.indiatimes.com/business/faqs/provident-fund-faqs/FAQs-All-about-PPF-accounts-for-NRIs/articleshow/10569464.cms?
Thank you for your help.
Subramanian Sabapathy says
September 7, 2018 at 11:36 amSir,
Opened a PPF account in 2000 which matured in 2016. I have been an NRI during these 15 years of PPF account holding period, Based on Post Office advice, gave instructions to close the account in line with the change to the regulation. Our PPF account got credited year on year at PPF rates. Please confirm that interest as applied can not be reversed by the Post Office and the Post Office cant apply Post Office Saving account rate on retrospective basis.
Sincerely thank you for the advice.
MoneyChai says
September 7, 2018 at 12:26 pmHi
No, the post office will not apply post office savings account rate on retrospective basis.
But why are you keeping it in savings account. Why do not you invest your money in other instruments to get better returns?
saradha says
September 30, 2018 at 11:35 amHi,
First of all thanks for the simple explanation. You have a great blog and I’m planning to check out the other sections as well. I have a query regarding my ppf
I opened a PPF when I was living in India. Later I moved abroad but continued making payments every month. When the Oct ’17 rule came out, I stopped making any additional payments, but the ppf account remained,I didn’t close it. I just read your blog and so will continue investing again.
This is my question: when the account comes to maturity in a few years, I will be living in India, but will be a citizen of another country. I have no idea if the normal ppf rules for a citizen applies to me as well. Can I continue making payments to my ppf assuming I can get the amount at the end of 15 years.
Thanks again for your help
Prashant says
January 8, 2019 at 2:19 pmMy PPF account is already in extended period (15 years ended in March 2017, got it extended for 5 years, means till March 2022)
I have joined a job in Canada in Oct 2018 but during this FY (2018-19) i remain tax resident in India and my tax resident status will change to Non-Resident from 1 April 2019.
Can I continue with my PPF account till March 2022 or I must close it as 15 year period is already over?
I understand that further extension (beyond March 2022) will not be allowed but I am confused whether I need to close it or can maintain till the ALREADY EXTENDED period ends.
Thanks in advance!
MoneyChai says
January 11, 2019 at 1:26 pmHi Prashant
Have you extended the PPF account with contribution or without contribution?
meher malani says
March 4, 2019 at 3:03 pmI wanted to know if i have an old ppf account – and i am an mri and contributing to my ppf – can i yet get tax benefit for the amount of Rs 1,50,000 i put into my PPF account in the current year?
MoneyChai says
March 9, 2019 at 8:12 pmHi Meher
Yes, you can get tax benefit.
Chacko Tharakan says
March 27, 2019 at 10:34 pmI completed 15 years investment in PPF and it was extended on wef 01/04/15, I became an NRI in 2018 Can I continue till 2020 with contribution from NRO a/c
Sanjay says
April 4, 2019 at 4:01 amMy PPF account is already in extended period (15 years ended in March 2006, got it extended for 5 year blocks with yearly contributions.The last 5 year extension with contribution was done in 2017 so my PPF account is valid till, March 2022).
I went to the us in Sept 2018.So I will become a NRI since April 2018, but during this FY (2018-19) I remain tax resident in India and my tax resident status will change to Non-Resident from 1 April 2019.
Can I continue with my PPF account till March 2022 or I must close it as 15 year period is already over?
I understand that further extension (beyond March 2022) will not be allowed but I am confused whether I need to close it or can maintain till the ALREADY EXTENDED period ends.
MoneyChai says
April 17, 2019 at 6:04 pmHi Sanjay
You can continue till 2022.
Varun says
April 5, 2019 at 9:52 amMy ppf account got matured this year i.e. 31st March’19. I came to Canada as a permanent resident last year feb’18, so now how can I withdraw the ppf amount being in Canada and will there be change in the interest rate or any further tax deductions.