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How can an NRI contribute to PPF & NSC?

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  • As per the government Savings Promotion General Rules, 2018 read with PPF Scheme, 2019 and NSC  (VIII Issue) Scheme, 2019, if the account holder subsequently becomes an NRI during the period the account is in operation, the account may be continued till its maturity on the non-repatriation basis

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I have a national savings certificate (NSC) account and a public provident fund (PPF) account, which was opened a long time ago. Since I plan to go abroad on a work visa for around three years, can I continue to contribute to the PPF and NSC accounts? Do I have to inform the post office about this? Also, can non-resident Indians (NRIs) invest in NSCs?

— Name withheld on request

 

As per the government Savings Promotion General Rules, 2018 read with Public Provident Fund Scheme, 2019 and National Savings Certificates (VIII Issue) Scheme, 2019, if the account holder subsequently becomes an NRI during the period the account is in operation, the account may be continued till its maturity on the non-repatriation basis (i.e., the amount cannot be remitted outside India). Further, the account will not be allowed to be extended or continued beyond maturity.

For the PPF account, the account holder is allowed premature closure of the PPF Account (with 1% penal reduction of interest rate) on change of residential status of the account holder on production of the copy of passport and visa or income-tax return (ITR). Such pre-mature closure will not be allowed before five years from the end of the year in which the account was opened.

 Therefore, you have the option to continue contributing to your PPF account till maturity or you also have the option to prematurely close the PPF account if you have been contributing for a period of over five years. The total investment allowed under the PPF account is 1,50,000 per financial year.

While the interest income from a PPF account is exempt from income-tax, interest income from the NSC account is taxable. However, interest income accrued from the NSC account is eligible for deduction under Section 80C as a qualifying reinvestment subject to a ceiling limit of 1,50,000 per financial year clubbed with all other qualifying investments.

Sonu Iyer is tax partner and people advisory services leader, EY India.

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