PPF for NRIs — The Rules
Cannot Open New PPF Account
As per RBI guidelines, NRIs are not eligible to open new PPF accounts. If you were a resident when you opened your PPF account and then became an NRI, you can continue it — but only until its 15-year maturity. You cannot extend it beyond maturity.
Existing PPF Accounts — Key Points
- You can continue contributing to an existing PPF account from your NRE or NRO account
- Interest rate: 7.1% p.a. (compounded annually, set by government quarterly)
- Interest earned is tax-free in India (exempt-exempt-exempt status)
- Lock-in: until 15-year maturity — no premature withdrawal for NRIs
- On maturity, the full balance (principal + interest) can be repatriated to your foreign account
- Loans against PPF: Not available to NRIs after becoming NRI
NPS for NRIs — Fully Open
National Pension System (NPS) is an excellent long-term retirement vehicle for NRIs. Here's what makes it attractive:
Who Can Invest
- Indian citizens aged 18–70, including NRIs
- Investment via NRE or NRO account
- Available through POPs (Points of Presence) — major banks including SBI, HDFC, ICICI
- Online registration at enps.nsdl.com
NPS Fund Options
| Fund Type | Asset Allocation | Risk | Expected Return |
|---|---|---|---|
| Auto Choice (LC-75) | 75% equity at age 35, reduces with age | Moderate | 10–12% |
| Active Choice — Equity (E) | Up to 75% in equity | High | 11–14% |
| Active Choice — Corporate Bond (C) | Corporate debt | Low-Med | 8–9% |
| Active Choice — Govt Securities (G) | Government bonds | Low | 7–8% |
Tax Benefits
- Section 80CCD(1): Deduction up to ₹1.5L (within 80C limit)
- Section 80CCD(1B): Additional deduction of ₹50,000 — over and above 80C limit
- Total possible deduction: ₹2L per year
- NRIs can claim these deductions only if they file Indian ITR
NPS Withdrawal Rules
At age 60: Withdraw up to 60% of corpus tax-free. The remaining 40% must be used to purchase an annuity (monthly pension). The 60% lump sum is fully exempt from tax — a significant benefit over mutual funds.
Partial withdrawal: Allowed after 3 years for specific purposes (children's education, house purchase, medical emergencies).
What Happens to PPF/NPS When You Return to India?
Both accounts convert smoothly when you return. Your NRI status on the account is updated to Resident, and you regain full access including account extension (for PPF) and normal contribution rules. No repatriation needed — the funds are already in India.