PPF Rules: Big news for NRI’s. Many Indians continue to maintain their investment schemes and bank accounts in India despite settling abroad. However, changing their residential status creates several compliance issues for these individuals. Therefore, a common question arises, can parents deposit money into their children’s Public Provident Fund (PPF) accounts after becoming NRIs?
What the PPF rules say?
According to PPF rules, a person who becomes an NRI under the Foreign Exchange Management Act (FEMA) cannot open a new PPF account. However, if the account was opened while living in India, they can continue it for 15 years. According to Mumbai-based CA and CFP Balwant Jain, “NRIs can continue contributing to the existing account, but they cannot extend its term.” A minimum annual deposit of Rs 500 is sufficient to keep such an account active. However, after the account matures, the amount must be deposited into an NRO account.
Keep in mind that PPF amounts are non-repatriable, meaning they cannot be directly repatriated abroad. However, an amount of up to $1 million can be repatriated from an NRO account every year, provided applicable taxes have been paid. Tax Benefits and Investment Limits A maximum of Rs 1.5 lakh can be invested in PPF per financial year, and this qualifies for tax exemption under Section 80C. If the father is already depositing Rs 1.5 lakh in his account, depositing it in the children’s account will not provide additional tax benefits.
Furthermore, a person cannot deposit more than Rs 1.5 lakh in his own account and the children’s accounts combined. Therefore, if the father wishes to deposit money in the children’s accounts, he should send the amount as a gift to the children’s bank accounts, so that the deposit is made from their account. Changing the bank account status is also necessary. After the daughter becomes an NRI, she will have to inform her bank about the change in residential status. Following this, the bank will convert her existing savings accounts into NRO accounts.