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PPF A/c’s will be deemed to be closed on the day the investor becomes a non-resident

November 3, 2017

PPF A/c’s will be deemed to be closed on the day the investor becomes a non-resident

Under the rules of the Government, NRI’s cannot open a new PPF account in India. But they were allowed to keep contributing to their existing PPF accounts as per a 2003 notification. This was for the PPF account they opened prior to becoming NRIs.

But, according to the latest changes to the Public Provident Fund Act, 1968, if a resident who opened an account under this scheme subsequently becomes a non-resident before the maturity period, the account shall be deemed to be closed with effect from the day the assessee becomes a non-resident. Public Provident Fund (Amendment) Scheme, 2017 says that interest with effect from that date will be paid at the 4 per cent p.a. which is applicable to the post office savings account up to the last day of the month preceding the month in which the account will actually be closed. This is nearly half of what these investments earn at present.

The government has kept interest rates on small savings schemes unchanged for the October-December quarter. The interest for both PPF and NSC schemes stands at 7.8% p.a for October-December. Since April last year, interest rates on all small saving schemes are declared on a on a quarterly basis.

Note: NRI as per Income Tax Act: 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 is termed as NRI.

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