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Can an NRI open a PPF in India?
Being an NRI
means best of both Worlds. You earn well abroad. You are welcomed at home.
So what
about the PPF? Can an NRI open a PPF in
India?
No… an NRI
cannot open a PPF account in India. If you are a resident Indian you can open a
PPF before you become an NRI.You have to
make contributions to the PPF only through your NRE/NRO accounts.
You can
continue making contributions to this PPF even after you become an NRI only
until the maturity of the PPF.On maturity of the PPF you (The NRI) will have to withdraw all
the money in the PPF. You cannot continue investing in the PPF beyond 15 years.
No additional subscription (You cannot make additional contributions) for a
further block of 5 years.
If you (The NRI) leave the money in the account past the
maturity date it will be considered as “extended without contribution” in
blocks of 5 years for an unlimited time. You do not have to make the minimum
contribution of INR 500 but your account continues to earn interest at the prevailing
rate (interest rate on PPF tied to government securities rates).
You can continue to extend your PPF for unlimited periods of
time.
If you are not taxed in
India as you are an NRI fully settled abroad and not earning any income in
India how does the contribution to a PPF help you save tax?
If your dad is paying taxes he can make a contribution to
your PPF. Your dad can claim a deduction on the contribution he makes to your
PPF under Section 80 C of the income tax act.The contribution made by your dad is a gift and you don’t
have to pay gift tax.
You are an NRI with an
income in India:
If you have an income in India (Earn in India) then you have
to pay tax on this income despite being an NRI.You can claim a deduction up to INR 1.5 Lakhs a year under
Section 80 C of the income tax act on the income you earn in India by investing
in a PPF.
On maturity you can repatriate (send abroad) this money (Principal
+ Interest) to the country where you reside using your NRO account.If you convert the amount you get from your PPF (in rupees) to
dollars or any other currency of the country you reside then you are faced with
currency risk. (Fluctuations between rupee vis a vis other currency).
What happens if you are
an NRI residing in the US?
If you have income (earning in India) you have to pay tax on
this. You can claim a deduction up to INR 1.5 Lakhs per annum against the
income you earn in India by investing in the PPF under Section 80 C.
The interest you earn from the PPF is tax free. You can
withdraw this money and repatriate it to the USA using your NRO account.
The interest amount (income) you earn from the PPF is taxable
in the US.
If you are an NRI and already have a PPF account in India you
must continue making contributions in it until maturity.
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