Under the Public Provident Fund Scheme, 2019, only resident individuals are eligible to open a PPF account. Non-Resident Indians (NRIs), Persons of Indian Origin (PIOs) and Overseas Citizens of India (OCIs) are not allowed to open a fresh PPF account after they become non-residents. According to reports from Business Standard, if a person has already acquired NRI status before applying, they are not eligible to invest in the scheme. The scheme offers an interest rate of 7.1% per annum and follows the Exempt-Exempt-Exempt tax treatment, making both the interest earned and maturity amount tax-free in India. An NRI can use funds in the NRE account or the NRO account to make investments in the PPF account, but cannot open a joint account with another individual.
For account holders who opened a PPF account while residents and later became NRIs, the rules allow continued operation until the original 15-year tenure completes. As reported by Mint, such account holders can continue making deposits within prescribed limits during this period. The annual contribution rules remain unchanged with a minimum investment of ₹500 per financial year and maximum of ₹1.5 lakh per financial year. Contributions are generally made through an NRO account, depending on the bank's operational process. However, NRIs cannot opt for five-year extensions after the initial maturity period, unlike resident Indians who can extend their accounts in blocks of five years. If you fail to make the minimum investment in a year or years, your account will be considered dormant. Subsequently, when you want to revive the account, you would need to invest ₹500 for each year that you missed plus pay up a penalty of ₹50. The current PPF interest rate stands at 7.1% for this quarter.
After the account matures, the accumulated corpus, including interest earned, is generally credited to the account holder's Non-Resident Ordinary (NRO) account. According to Mint, the PPF balance is non-repatriable, which means it cannot be directly transferred abroad. An NRO account can be opened by both NRIs and PIOs, with funds in an NRO account being remittable overseas up to $1 million (around ₹8.3 crore) per financial year, after paying applicable taxes. Partial withdrawals are permitted from the 7th year onwards, subject to certain ceiling limits. Such withdrawals must not exceed 50% of the balance at the end of the fourth year, or 50% of the balance at the end of the immediate preceding year, whichever is lower. PPF account holders have an option of extending their accounts after the 15-year tenure with or without further subscription, for any period in a block of 5 years. The balance in the account will continue to earn interest at normal rate as admissible on PPF account till the account is closed.
Loans can be availed from the 3rd financial year excluding the year of deposit. The amount of such loans must not exceed 25 percent of the amount that stood to the account holder's credit at the end of the second year immediately preceding the year in which the loan is applied for. A fresh loan is not allowed when a previous loan or interest is outstanding. Interest is charged at a rate of 2% if repaid within 36 months and at 6% on the outstanding loan after 36 months. If you are an NRI at the time the deposit matures, you would need to withdraw the balance. An NRI is not eligible for extension on the PPF account. What happens if you leave the account unattended past the maturity date? "In such cases the account will be considered 'extended without contribution' in blocks of 5 years for an unlimited period of time. Extended without contribution means that the NRI will not have to make the minimum yearly investment of ₹500. His account will continue to earn interest at the prevailing rate."
The rules become stricter when an individual ceases to be an Indian citizen. As reported by Mint, when the account holder acquires foreign citizenship, the PPF account is treated as closed from the last day of the month immediately preceding the month in which the person becomes a citizen of another country. This also affects the interest treatment. The balance no longer earns the standard PPF interest rate of 7.1% after that date. Instead, interest is credited only at the rate applicable to a Post Office Savings Account until the account is formally closed, as provided under the scheme rules. Once an individual becomes an NRI or PIO, they are required to inform their bank or financial institution about the change in residential status, as the PPF proceeds will be transferred to this account upon maturity. The bank will then convert the existing savings account into an NRO account, as required by the RBI.
