Can you continue your PPF after moving abroad? Rules for existing account holders who become NRIs and foreign citizens

Many investors open a PPF account in India because of it's attractive returns and tax benefits, but confusion often arises when they move abroad for education, job opportunities or other such reasons. While neither non-resident Indians nor foreign citizens are allowed to open a new PPF account, the rules governing an existing account are different in the two cases.

The Public Provident Fund (PPF) is a popular long-term savings scheme, which is backed by the government, offers an interest rate of 7.1% per annum and follows the Exempt-Exempt-Exempt (EEE) tax treatment, making both the interest earned and maturity amount tax-free in India.

Can NRIs keep investing in PPF after relocating?

NRIs who opened their PPF account while they were resident Indians are allowed to continue contributing to their existing PPF account until maturity.

However, they cannot extend the tenure beyond 15 years, a benefit that is only available to resident Indians. They can extend their contributions to PPF in blocks of five years, as many times as they want.

Like resident account holders, NRIs are also required to maintain a minimum deposit of ₹500 per financial year to keep their PPF account active during its original 15-year tenure. If this minimum contribution is not made in a financial year, the account may become inactive and require reactivation through prescribed procedures and penalties.

What if you become a foreign citizen?

The situation changes completely when the account holder acquires foreign citizenship. In such cases, the PPF account is treated as closed from the last day of the month immediately preceding the month in which the person become 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.

How are the proceeds handled after maturity?

Once the PPF account matures, the accumulated corpus must be credited to the individual’s Non-Resident Ordinary (NRO) account. The PPF balance is non-repatriable, which means it cannot be directly transferred abroad.

An NRO account can be opened by both NRIs and a person of Indian origin (PIO). Here's the different between the two:

— Who is an NRI: They can be an Indian citizen who resides outside India for employment, business, or other reasons that indicate an intention to stay outside India for an uncertain period. NRIs maintain their Indian citizenship but are classified differently for taxation due to their residency status.

— Who is a PIO: They can be a foreign citizen (except those from Pakistan, Bangladesh, Sri Lanka, Bhutan, Afghanistan, China, and Iran) who has held an Indian passport at any time or whose parents, grandparents or great-grandparents were born in and were permanent residents of India. It also applies to those who is a spouse of an Indian citizen of a PIO.

However, funds in an NRO account can be remitted overseas up to $1 million (around ₹8.3 crore) per financial year, after paying applicable taxes, according to guidelines set by the Reserve Bank of India (RBI).

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.

This ensures that income earned in India, such as rent, dividends, pension, or maturity proceeds from investments, is managed in compliance with foreign exchange regulations prescribed under FEMA and RBI guidelines.