Who is a Non Resident Indian (NRI)?
Income Tax doesn’t directly define NRI. Section 6 contains criteria to consider Resident in India and provides that anyone who doesn’t fulfil this criteria is considered Non-Resident.
Simply speaking, the status of a person as a resident or non-resident depends on his period of stay in India. The period of stay is counted in number of days for each financial year beginning from 1st April to 31st March.
Who is a Resident of India?
An individual will be treated as a Resident in India in any previous year if he/she is in India for:
- Atleast 182 days in that year, OR
- Atleast 365 days during 4 years preceding that year AND atleast 60 days in that year.
An individual who does not satisfy both the conditions as mentioned above will be treated as “non-resident” in that previous year.
Old rule for Personal Provident Fund (PPF)
As per the provisions, NRIs are restricted to open a new PPF account in India. However, if they were residents while opening the account and subsequently became NRIs, they were allowed to make contributions into their said PPF account.
New Rule for Personal Provident Fund
On 3rd October, 2017 Government came up with a notification namely Public Provident Fund (Amendment) Scheme, 2017
“Provided that if a resident who opened an account under this scheme, subsequently becomes a non Resident during the currency of the maturity period, the account shall be deemed to be closed with effect from the day he becomes a non-resident and interest with effect from that date shall be paid at the rate applicable to the Post Office Saving Account up to the last day of the month preceding the month in which the account is actually closed”.
As per this notification
- When your residency status is changed to NRI, PPF account will be deemed to be closed, hence no further contribution would be allowed.
- Interest on PPF would be now applicable to Post Office Saving Account which is 4% rather than prevailing interest rate of 7.8% until you close the account itself.
Old Rule for National Savings Certificate (NSC)
Similar to PPF, NRI cannot directly invest in NSC. However, if an NRI is allowed to continue existing investments till maturity date considering the account has been opened while being a resident.
New Rule for National Savings Certificate
When an individual becomes an NRI, his / her NSC account is deemed to be closed. Till the time an NRI actually enchases, the accumulated money in NSC certificate will earn an interest of Post Office Savings Account which is 4%.
It’s important to note that these rules are prospective in nature.
Suppose Mr. Ajay became an NRI citizen in 2014, he would have continued to enjoy the benefits till October 2017. Now after the amendment, Mr. Ajay would not be able to contribute to PPF Account or NSC certificate and his interest income would drop down to 4%.
In cases where, family of an individual also moves to a different country for employment purpose. If they fall into the definition of NRI, then similar rules would be applied for PPF and NSC.
How to withdraw money from PPF Account?
An NRI’s request to close PPF account can be processed by bank or post office only his / her signature is attested by an authority. The attestation can be done by a Gazette officer or PSU Bank officer.
An NRI should send a PPF account closing form to their relatives, friends, parents or financial advisor in India where they have NRE/NRO account. An authority letter must be attached allowing them to do withdrawal process by closing PPF account on behalf of an NRI.
Authorised person after getting attestation of the authority letter either from a Gazette officer or a PSU bank officer should proceed to the bank where PPF account is held. On verifying the authenticity of documents, bank will close the account.
– Jinay Savla