Are PPF for NRI or NSC for NRI Redundant | DBS Treasures (2024)

FAQs

Are PPF for NRI or NSC for NRI Redundant | DBS Treasures? ›

Final Note: PPF and NSC do not become redundant for NRIs. If you are an NRI currently holding a PPF or NSC, it is advisable to continue both until maturity. Once your investment matures, you can then transfer the proceeds in your NRE account.

As such, an NRI cannot invest in PPF. However, if people with current NRI status, opened a PPF account before they got the NRI status, they can continue with the account until maturity. *All savings are provided by the insurer as per the IRDAI approved insurance plan.

Both NSC and PPF are popular investment options. The main difference between them is the lock-in period. NSC has a maturity period of five years, but it comes with a slightly lower interest rate. At the same time, PPF has a higher interest rate and a longer lock-in period of 15 years.

With this amendment, the accounts will deem to be closed on the day a resident individual becomes a Non-Resident Indian. From the closure date, the interest given on these accounts will fall to a mere 4% p.a. unless the money is encashed.

Taxation on PPF returns for NRI

At maturity, once an NRI account holder withdraws the maturity funds from his/her PPF account, the same is credited to his/her NRO account. Therefore, such funds are taxable as per the tax rate applicable on NRO account credits.

Like an ordinary Indian Resident, an NRI can also withdraw a partial amount from the PPF account. But the amount can't be repatriated abroad. The NRI has to spend this amount only in India. However, the NRI can repatriate the maturity proceeds via the NRO account.

As far as the interest is concerned, PPF interest is tax-free, whereas, NSC interest is taxable and will be added to your taxable income. However, the interest in NSC is also eligible for deduction under Section 80C of the Income Tax Act. It is better to pay tax on the accrued interest annually rather than on maturity.

PPF is the most tax friendly 80C investment option since its maturity proceeds are entirely tax free. After PPF, ELSS is one of the most tax friendly 80C investment options. ELSS capital gains of up to Rs 1 lakh in a financial year are tax free. Capital gains in excess of Rs 1 lakh are taxed at 10%.

The best films offer a superior barrier against UV damage, oil, bugs, and scratches from rocks, dirt, flying debris, and other hazards. PPF with a thickness of about 6 mils (not including the adhesive, clearcoat, or release liner) is recommended to provide top-tier protection. Low-quality films are often thinner.

Is PPF taxable in USA? ›

U.S. Taxation of a PPF

The reason that the PPF becomes so complex is because technically, since a PPF is generating interest income and dividends (even though it is not being distributed), it is taxable in the United States.

Investment limits: PPF allows a minimum investment of Rs 500 and a maximum of Rs 1.5 lakh for each financial year. Investments can be made in a lump sum or in a maximum of 12 instalments. Opening balance: The account can be opened with just Rs 100 a month.

Best Bank for NRI Saving Account. Some of the best banks for NRI saving account are Axis Bank, ICICI, HDFC, Kotak Mahindra, Bank of Baroda, Deutsche Bank, and the State Bank of India (SBI). They offer attractive rates and best services.

The interest earned on the deposit is exmept from tax in India. For your convenience when you are overseas, the banks offer the option to appoint a resident Indian as a mandate holder for operative purposes. It is one type of investment where Tax on NRI FD is entirely exempt.

The Union government has increased the interest rate of the National Savings Scheme from 7 per cent to 7.7 per cent for the April-June quarter of 2023.

According to Article 15 of the DTAA, a person who is a particular country's resident but has income from a foreign country source, his income would be taxed 'only' in the residential country. This means if an NRI works in the US and his income comes from an Indian source, he has to pay only US taxes.

NRIs can avoid double taxation (meaning: getting taxed on the same income twice in the country of residence and India) by seeking relief from the Double Taxation Avoidance Agreement (DTAA) between the two countries. Under DTAA, there are two methods to claim tax relief – exemption method and tax credit method.

PPF rules for NRIs

You can continue to invest in the existing PPF Account, i.e., the account opened when you were a Resident Indian. You cannot open a new PPF Account after becoming a Non-Resident Indian. You must close the account after the 15 years maturity period. You cannot extend the maturity period.

Can OCI invest in PPF? ›

However, there is no bar on residents to open fresh PPF accounts. Hence you can indeed invest in PPF. Even if you were to become NRIs/PIOs again during the currency of the PPF term (15 years), the rules allow NRIs to operate accounts opened when their status was resident Indian.

PPF has a maturity period of 15 years after which you can choose to withdraw funds from your PPF account. Partial withdrawals are also allowed before the account matures (after the 6^th financial year from account opening) but only under certain circ*mstances.

What is Return? Both PPF and NSC offer attractive interest rate, which is 8.1% per annum and 8.0% per annum respectively. Moreover, in PPF, interest rate is compounded annually, while in NSC it is compounded half-yearly (twice a year).

The PPF interest rate is 7.1%, whereas, NSC is 6.8%.

The highest FD rate in SBI Bank is 5.40% (for a tenure of 5-10 years). The highest FD rate in ICICI Bank is 5.35% for 5-10 years. The highest FD rate in Axis Bank is 5.75% for a term of 5 to 10 years. The highest FD rate in HDFC Bank is 5.50% for a term of 5-10 years.

To maximise the interest payout on PPF deposits, you should choose to deposit by the 5th of the month, and the sooner in the financial year, the better. If you deposit towards the end of the financial year in March, you will surely save income tax but earn interest only for one month—March—for that FY.

The tax-saving FDs have a lock-in of 5 years, which is much lesser than PPF. But FDs go carry some risk and also the interest you earn is taxable. So, if you are ok with a 15-year lock-in then PPF can be a good option keeping all things in mind.

Only Indian citizens residing in the country can open a PPF account. Individuals over 18 years will meet the age requirement for PPF eligibility. There is no upper age limit for opening a PPF account.

How much should I invest in PPF every year? ›

The first exemption is on the deposits you make in a PPF account. Deposits to a PPF account are exempted from the taxation up to a maximum of Rs. 1.5 lakh in a FY under Section 80C of the Income Tax Act, 1961. A Tax saving fixed deposit has a higher interest-earning potential than savings accounts.

If you have completed 5 years of service, you can withdraw your EPF corpus with no tax. If a withdrawal is made before the completion of 5 years of service, additional TDS is levied. The TDS is deducted at the rate of 10% if you furnish your PAN and 34.608% if you are not able to furnish your PAN.

The capital gains from the retirement funds will be taxable in India. The income in form of pension may also be taxable in India. However, the foreign tax credit may be claimed in India or in the US to avoid double taxation under DTAA depending upon the residential status.

"Amount beyond Rs 1.5 lakh cannot be deposited in the PPF account as the transaction will be rejected at the time of transfer. Thus, the question of excess amount doesn't arise. Even if the depositor manages to deposit more than the limit, the transaction shall be subsequently rejected.

In other words, this means that you cannot deposit more than Rs 150,000 in a PPF account in a financial year. However, there is no restriction on the number of deposits and you can deposit funds in multiples of Rs 50 in your PPF accout and a minimum of Rs 500 per annum.

A person is allowed to make a maximum of 12 deposits per financial year in the PPF account. Also, such deposits cannot be more than 2 in any particular month.

Therefore, to answer the initial question, no, an NRI cannot hold a resident savings account in India.

NRO Recurring Deposit account

NRO (Non-Resident Ordinary) Recurring Deposit Account, maintained in Indian Rupees, is an excellent option for NRIs to make big savings by investing small sums every month from the income earned in India. By continuing to use the site, you are accepting the bank's privacy policy.

Can NRI open bank account in USA? ›

You can open NRI Account for Indians staying in America with HDFC Bank. Make the most of the features and benefits offered through our simple and smarter banking solutions. Effortless and seamless repatriation of funds to your country of residence through our NRE Account.

2. Can an NRI maintain multiple accounts with different banks in India, simultaneously ? Ans.: Yes, there is no prohibition to open and maintain multiple accounts a/cs.

Both NRO and NRE Saving Accounts allow smooth movement of funds because you can repatriate both, the principal and interest abroad. Funds in NRE Accounts are fully and freely repatriable.

Deposits made in foreign currencies in an NRE account are subject to conversion into Indian rupees. Hence, such deposits might fluctuate in value due to appreciation of domestic currency (or depreciation of foreign currency), thereby incurring losses during repatriation.

Once you come back to India permanently, you are a resident as per FEMA. And residents are not permitted to keep a NRE account. Interest on NRE FD is tax exempted only for Non-Residents. Therefore from the day you come back to India any interest earned in NRE FD becomes taxable in your hand.

The PPF interest rate, on the other hand, has remained unchanged at 7.1%. The Public Provident Fund (PPF) is one of the popular long-term investment schemes backed by the Government of India. It provides security with competitive interest rates and tax-free returns.

Example of Calculating Interest With the Post Office NSC Calculator. 6.8% p.a. As such, the total interest earned is ₹(1,46,254 - 1,00,000) = ₹46,254. From the above calculation, it is clear that an individual investing ₹1,00,000 will earn a total interest of ₹46,254 in 5 years, and his/her total amount upon maturity.

There is no PPF eligibility age. Minors or persons with an unsound mind can have their PPF accounts provided that a guardian makes it for them. Any Indian citizen can have only one PPF account.

Who Cannot open a PPF account? ›

Eligibility: Any Indian citizen can open a PPF account either in his own name or on behalf of a minor. But, you can't open a joint account or one for a Hindu Undivided Family (HUF). Also, an individual can have only one account in his name.

A Fixed Deposits (FD) is a popular investment option for non-resident Indians (NRIs) looking to earn a fixed return on their money. Along with the advantage of a guaranteed interest rate, they offer the stability and security of investing with a bank or financial institution.

This indicates that you cannot invest more than Rs. 1.5 lakhs in a PPF account per year. The contribution can be made at any time of year and in any amount. The maximum number of contributions permitted in a calendar year is 12.

PPF rules for NRIs

You can continue to invest in the existing PPF Account, i.e., the account opened when you were a Resident Indian. You cannot open a new PPF Account after becoming a Non-Resident Indian. You must close the account after the 15 years maturity period. You cannot extend the maturity period.

As mentioned before in the article, the minimum amount that needs to be invested in the PPF account is ₹500. If an individual fails to deposit this amount at the end of the year, their account will be discontinued. When a PPF account is discontinued, no more money can be invested in the account.

Suppose you have two minor children, you can open an account in each child's name. Do note that the overall investment limit still remains the same, i.e., Rs 1.50 lakh. So, if you wish to invest more than Rs 1.50 lakh in PPF, your spouse can open a PPF account in his/her name and invest in the second child.

About SBI PPF Account

State Bank of India (SBI), which is the largest bank in the country, offers the PPF scheme with a good interest rate. SBI has over 15,000 branches in India, therefore, getting access to the scheme is easy. Opening of the PPF account offered by SBI can also be done online.

It is always advisable to invest in the PPF at the beginning of the year. This way you will be earning interest on the deposits for the entire year. Therefore, investors who intend to make a lump sum investment in PPF must preferably do it before April 5th to make the most of the interest.

Additionally, NRIs are barred from investing in instruments such as currency derivatives and commodities. Apart from these, NRIs cannot participate in intraday trading in the Indian stock markets, unlike resident Indians. They are only allowed to take the delivery of shares.

How much NRI can deposit in India? ›

Upto $1 million can be remitted outside India or transferred to your NRE account every year subject to some procedural compliances from NRO account. The money in NRO account can also be used for making regular local payments in rupee like rents for property, taxes.

After PPF, ELSS is one of the most tax friendly 80C investment options. ELSS capital gains of up to Rs 1 lakh in a financial year are tax free. Capital gains in excess of Rs 1 lakh are taxed at 10%.

Provident fund investment has a longer lock-in period of 15 years. Thus, it is not liquid like other investment options like mutual funds that do not have any lock-in. Also, equity-linked saving scheme(ELSS) a tax saving mutual fund under Section 80C has the lowest lock-in period of 3 years.

You are required to make a minimum deposit of Rs.500 per financial year to keep the account active. If you fail to make this deposit, the account will be discontinued. You will have to pay a penalty of Rs.50 along with a minimum deposit of Rs.500 to reactivate the account. An interest rate of 7.1% p.a.