NRIs Can Continue PPF Accounts Until Further Notice

Non-Resident Indians (NRIs) who had invested in Public Provident Fund (PPF) can continue their accounts for now, according to a new official announcement.

According to the new office memorandum released by the Department of Economic Affairs (DEA) on Feb. 23, the earlier notification about closure of PPF accounts has been temporarily dismissed. “It has now been decided to keep the said notification in abeyance till the further order in this regard,” the office memorandum stated.

The earlier notification was issued on Oct. 3, 2017 by the  DEA. The amendment to the Public Provident Fund Scheme, 1968, notified in the official gazette, “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.”

Interest will be paid at the rate applicable to Post Office savings accounts till the date the PPF account is closed. The  Post Office savings account fetch interest rate of 4 per cent, .which is almost half of that for PPF at present.

For the PPF scheme, the period of maturity period is 15 years but the same can be extended for further five years and so on for Indian citizens. The scheme permits withdrawal every year from the seventh financial year from the year of opening account while the loan facility can be availed from the third financial year.

The PPF is a tax-free savings tool that was created in 1968 by the Ministry of Finance.

Before 2003, NRIs were not permitted to make any contributions into their existing PPF accounts — accounts opened before their residential status changed to Non-Resident Indian. In 2003, however, a new notification permitted NRIs to continue investing in their PPF accounts that existed until maturity.

According to PPF rules, an investment of at least Rs 500 per financial year is required. The principal invested in PPF qualifies for deduction under Section 80C of the Income-tax Act, 1961, and the interest earned is also exempted from tax under Section 10.

The account can be opened by cash or cheque, and in case of cheque, the date of realization of cheque in the government account is taken as the date of opening of account. The subscriber can open another account in the name of minors but subject to maximum investment limit by adding balance in all accounts.