From PPF maturity to tax: Rules, eligibility, and guidelines NRIs must know about this post office savings scheme

A Public Provident Fund (PPF) is a long-term savings and investment scheme backed by the Indian government and offered by India Post as a part of small savings scheme. In effect since 1968, it offers a fixed interest income but comes with a lock in period of 15 years.

Non-resident Indians (NRIs) are not allowed to open a new PPF account in India because of certain government regulations but those who already had a PPF before becoming NRIs can continue fresh contributions through their Non-Resident Ordinary (NRO) account till maturity provided Nationality remains Indian.

NRIs can continue investing through their NRO Account but cannot extend it in 5-year blocks beyond the initial 15-year term maturity period.

NRIs cannot extend their PPF accounts in blocks of five years after maturity while Indian residents can. Once NRIs reach the 15-year term, they must close their accounts. In case the PPF account is not closed and is left open then no further benefits will follow.

As per RBI guidelines, NRIs can get proceeds credited in an NRO or resident account and continue investing through their NRO Account but the invested amount and interest can be withdrawn and repatriated only upon completion of 15 year period.

Notably, PPF withdrawal before maturity is permitted only for specific purposes. Premature closure is allowed after completion of five financial years from the last day of the financial year in which PPF is opened. In case of premature closure, funds will be transferred to NRO account and the interest credited will be 1% lower than the rate at which interest has been credited in the account from the date of account opening. Since proceeds after PPF maturity are accounted as capital income, its repatriation is limited to a maximum of $1 million per year.

The PPF account of NRIs will not remain active if minimum deposit of ₹ 500 annually is not made which is an essential requirement of this post office small savings scheme. Meanwhile, the upper investment limit of a PPF account is ₹ 1.5 lakh per financial year.

The interest earning on your PPF investment is non-taxable as it falls under Section 10(11) of the Income-tax Act. However, tax treatment can vary in an NRI’s country of residence.

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