Planning to shift abroad? What about your PPF and EPF savings?

Shashi Kumar, after graduating with a degree in medicine, decided to shift to the United States in 2007 to pursue his MD. Subsequently, he became a full-time medical practitioner and eventually decided to settle in a foreign land in 2011. Now that he became a non-resident Indian (NRI), his public provident fund (PPF) savings seemed hanging in a nowhere land.

“I wasn’t sure about the rules around PPF at the time. So I decided to let go of it. I informed my elder brother residing in India about the PPF plan and gave him the details in case I get something on maturity. Though I never got a chance to look back at it,” Kumar said.

It may have been easy for Shashi to let go of the PPF fund as he left the country at a relatively younger age. However, for those who decide to become an NRI at a later stage due to job change, transfer, new opportunities, etc., they do have handsome savings that can’t and shouldn’t go waste.

PPF for NRIs

The government has changed the rules around PPF funds for NRIs a few times. This may have led to some confusion. Let’s take a look at the rules.

Initially, Indian residents who became NRIs were barred from opening a new PPF account. However, they could continue to make contributions to an existing PPF account and withdraw the money on maturity like the rest of us.

But in October 2017, the Centre amended this provision stating “residents who open a PPF account and eventually become NRIs, their account shall be deemed to be closed from the date of change of residential status – from resident to non-resident.” However, this rule was never bought into effect.

Finally, in December of 2019, the government informed about the ‘PPF Scheme 2019’that was to replace the original Scheme of 1968.

As per this, NRIs are no longer allowed to make any new deposits into their PPF account. But, they are permitted to hold their pre-existing accounts (opened while they were Indian nationals) until maturity. While the tax laws remain unchanged in India – the proceeds are tax-free, NRIs must keep a check on how they’ll be taxed in their country of residence.

EPF for NRIs

Until you reach the age of 58, the interest on your existing Employee Provident Fund (EPF) shall continue without interruption. Having completed a minimum 5 years of service, the NRIs can withdraw the money from their EPF. The waiting period of 60 days is mandatory after resigning from the job to withdraw the funds. This is applicable even for those who haven’t attained the age limit of 58.

Meanwhile, NRIs are instructed to convert their resident accounts to non-resident accounts when they decide to leave the country for settling abroad. The Reserve Bank of India has issued strict guidelines in this regard.