Moving abroad for work, higher education, or permanent residency can change how you manage your investments in India. If you already have a Public Provident Fund (PPF) account or invest through the National Pension System's (NPS) Tier II account, your residential status can affect your options for continuing contributions, withdrawing money and maintaining these accounts.
While an existing PPF account can continue until its original maturity after you become a Non-Resident Indian (NRI), NRI subscribers cannot operate an NPS Tier II account under the current eligibility rules.
Here is what you need to know before relocating overseas.
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What Happens To Your PPF Account After You Become An NRI?
If you opened a PPF account while you were a resident Indian, you can continue contributing to it until its original maturity, even after becoming an NRI.
The Ministry of Finance's PPF rules allow existing accounts to continue until maturity, subject to applicable conditions. The account operates on a non-repatriation basis, meaning the investment is subject to the relevant restrictions governing the transfer of funds outside India.
Can you close your PPF account early?
Yes, subject to the scheme's conditions. Under the Public Provident Fund Scheme, 2019, a change in residential status is a permitted ground for premature closure after the account has completed five years from the end of the financial year in which it was opened. In such cases, the interest payable is reduced by one percentage point from the rate credited to the account.
What about tax on PPF returns?
PPF interest and maturity proceeds are exempt under the applicable provisions. However, the country in which you become a tax resident may tax the income or require disclosures under its own laws.
What Happens To Your NPS Tier II Account?
The rules are different for NPS Tier II. It is an optional investment account linked to an active NPS Tier I account. Unlike Tier I, it allows unrestricted withdrawals and does not offer tax benefits on contributions or investment gains.
According to the Pension Fund Regulatory and Development Authority (PFRDA), NRIs and Overseas Citizens of India (OCIs) with NPS Tier I accounts cannot activate Tier II accounts. This means that if you move abroad and become an NRI, you cannot continue operating your Tier II account as an eligible resident subscriber.
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If you already hold a Tier II account, contact your NPS service provider or Point of Presence (PoP) to confirm the process for closing it and withdrawing the balance.
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