PPF and NSC are the most popular long-term saving instruments in India. The amount invested in these instruments is eligible for deduction up to Rs 150,000 under section 80C along with other eligible investments.
The Govt. of India has recently revised investment rules relating to the investments by the Non-Resident Indians (NRIs) in the select Small Savings Schemes – PPF (Public Provident Fund) and NSC (National Savings Certificates).
As per the new amendment done to PPF Act, “account holders of the Public Provident Fund (PPF) account shall be deemed to be closed the day their residential status changes to NRI.”
Latest update (23-Feb-2018) : The Govt’s notification dated 3-Oct-2017, regarding closure of PPF accounts held by NRI has now been put on hold. The Govt has issued a latest notification on this as below. So, NRIs who currently hold PPF accounts can continue their investments in PPF accounts until further notice (if any). As per the new notification it has been simply been put on hold.
A separate notification has also been issued in respect of the National Savings Certificate (NSC), which states that an NSC is deemed to be encashed on the day when holder becomes an NRI.
Who is considered as an NRI? – A person is considered resident in India, if he is in the country for 182 days (or) 60 days in a year and 365 days in each of the preceding four years as per Income Tax Act. When a person doesn’t satisfy both these conditions, he/she is termed as NRI.
Below is the Flow chart to know if you are an NRI or Resident. (Kindly click on the image to download the flowchart.)
(Related Article : ‘How to know your Residential Status? Online Residential Status Calculator‘)
If your Residential status is NRI and you have made investments in PPF and/or NSCs then you need to be aware of the below revised rules.
NRI investments in PPF
Below circular clearly states that this new amendment is not applicable retrospectively. (My sincere thanks to one of my blog readers, Mr Kesavan, for emailing me this circular.)
NRI investments in NSCs
In case, you are in a foreign country and would like to close your PPF account now, below is the procedure to withdraw funds from PPF account ;
The above latest amendments will surely impact a large number of NRIs who have made investments in PPF/NSCs. The amendment indicates that such accounts may need to be closed / encashed. Once you return to India and become Resident Indians, you can open a fresh PPF account. (As of now, there is no clarity on whether these deemed to be closed accounts can be revived or not.)
So, what should NRI’s who have PPF and NSC accounts do now with their accumulated corpus? – I believe that NRIs should withdraw their funds in PFF/NSCs immediately (or during their next visit to India) and invest in other suitable/better investment avenues. As an NRI, before you consider any other investment alternative, suggest you to kindly know the current tax rules that are prevailing both in India and foreign country (especially rules related to ‘repatriation’).
Continue reading :
(Post published on : 31-October-2017)
This post was last modified on July 11, 2023 9:43 pm
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I became a non-resident Indian (NRI) in July 2017, when I migrated to the USA.
I was naturalized as a US citizen (OCI) in August 2022.
My NSCs mature in February 2023.
1) Does the 2017 Amendment apply to me? If so, how?
2) How do I encash my NSCs when they mature in February 2024? I am not in a position to visit India in the near future. I do not have a Post Office Savings account. However, I do have an NRO account.
Kindly advise.
Is an Aadhar card necesary while closing a PPF account by a Citizen of Indian Origin? Thanks for your reply.
L. Iyengar
Dear Mr Iyengar,
I believe that it is not mandatory, but you may have to submit a valid ID proof at the time of closing the account.
Dear Sir,
I am an NRI and my NSC got matured recently. I bought the NSC when I was in India. I am not returning to India soon and I want my father to encash the money on my behalf.
The post office is not cooperating and stating that I need to be present to encash the NSC. I read online that legal heir can opt for encashment upon submission of form SB84. I also read all the questions and answers in this section to see if you have already responded to similar questions before but did not find one.
Could you please help me with the encashment process.
Sincerely,
Binesh.
Dear Binesh,
I believe that SB84 form is used only in case of Death of investor for claiming the proceeds by nominee/a relative.
I also believe that you can send an authorized representative with original NSC, signed authorization letter, your bank account cancelled cheque etc., and can get the NSCs encashed.
Hii Shreekant Reddy sir
I have a PPF account from 2013 and I am not NRI, but i want to close my PPF account, sir plz tell me how to close the ppf account
Dear Pramod,
Kindly note that you can close PPF account prematurely only if your account has completed FIVE Financial Years. (This rule is not applicable in case of ‘death’ of the account holder.)
Suggest you to kindly go through this article @ PPF Account Premature Closure : Latest Rules & Eligibility Amount Calculation
Srikanth- Namsthe
My son is NRI from 2008. He opened a PPF a/c in capacity of Guardian of her daugher in 2012 with SBI. PAN Card and Aadhar card was submited at that time. The Ruling for NRIs was not in notice so the NRIs status was not disclosed at that time.Now, he wants to close this account. What shall be the treatment of Interest payable on this account. Please advise.
Regards
Dear Brij Mohan ji,
The Govt Notification (dated Oct 2017) has been kept on HOLD for now. NRIs can continue with their investments for time-being.
Suggest him to keep his PPF ac in active mode by contributing minimum amount every year till further notice or any new notification gets issued.
Confirmation from SBI
https://www.sbi.co.in/portal/web/personal-banking/public-provident-fund-ppf
Thank you dear Omkar, for sharing this link!
Hello,
I am planning to migrate from India soon expected to be in march 2018. I have a PPF account with SBI bank.
will i get my money invested back in hand if i close out the PPF account before i travel abroad by .showing the VISA .
Or is it necessary to Hold a NRE/NRO account to get the encashment. I dont have one now, i am planning to take one once i get all confirmations from my company. But is it possible to encash/withdraw the amount invested in PPF
Dear Rajesh,
I believe they will issue a cheque for the withdrawn balance and that needs to be deposited in NRE/NRO account I believe, as NRIs are not permitted to maintain regular Indian rupee savings account.
Ohkay, so does that mean I cannot encash the cheque without a NRE/NRO account??
I was thinking whether I can use this amount for my travel expenses of this gets encashed before I migrate
Dear Rajesh,
I believe that PO/Banks insist on having Savings account to withdraw the funds. I doubt encashment is allowed.
Hi Sreekanth,
This suspension looks temporary . The intention seems to be to not allow NRIs to invest in PPF . My question is if there is no new development until the first week of April, as an NRI, can I deposit new funds into my PPF account? Should I risk a new deposit given the previous directive of 4% savings rate since the date you become an NRI?
Dear OMKAR,
My suggestion would be not to make any major contributions to your PPF ac, but you may just make minimum contributions to keep it ACTIVE.
You may better off looking out for other alternative investments to PPF.
Hi sir ,
I am an NRI , I open ppf on my wife name on her name she do not have NRI account she has joint aacount with her father . can she continue with ppf or has to close .
Dear Manish..As the account holder is not an NRI, I believe she can continue it.
Hello Sreekanth
I opened a PPF account in 1999, became NRI in 2002. Maturity was in 2014 but extended that to 2019. How will my interest be calculated.
Dear Shelly,
You will get regular PPF interest till Oct 2017, after that till the time you actually close the PPF account you will get around 4% ie prevailing savings account interest rate.
There is further letter on this subject in February 2018.from the authorities.Can you please put this on this blog.
Raghuram.
Dear Raghuramlc ..If possible, can you kindly share it to me??