PPF, EPF, NSC for NRIs: Which Accounts You Can Keep and Which You Must Close

PPF, EPF, NSC for NRIs: Which Accounts You Can Keep and Which You Must Close

The advice circulating in NRI WhatsApp groups is dangerously simple: "Once you become an NRI, close all your small-savings accounts." It is wrong in one direction and incomplete in the other. Some accounts you are legally barred from extending and must let mature. Others you can keep running until maturity but never renew. And at least one keeps quietly earning you tax-free interest with no action required at all. Getting this wrong does not just cost you interest — it can convert a perfectly legal account into an "irregular" one that earns nothing, or trigger TDS you never expected. Here is exactly what changes for your PPF, EPF and NSC the day your residential status flips to non-resident.

What the law actually says

Three different rule-books govern these accounts, which is why one blanket instruction can never be correct.

PPF is governed by the Public Provident Fund Scheme, 2019 (notified under the Government Savings Promotion Act, 2018), not by the Income-tax Act. The scheme is explicit: a resident who opens a PPF account and subsequently becomes a non-resident during the currency of the account "may continue to subscribe to the account till its maturity on a non-repatriation basis." The two hard prohibitions are that an NRI cannot open a new PPF account, and an NRI cannot extend the account in the five-year blocks that residents enjoy after the initial 15-year term. Government clarifications also confirm that a PPF account held by a non-resident does not earn the notified PPF rate after the original maturity date if wrongly extended — it is treated as an irregular account.

EPF is governed by the Employees' Provident Funds and Miscellaneous Provisions Act, 1952 and its scheme. Your EPF balance does not "expire" when you leave India, but it stops earning interest once the account becomes inoperative — which happens 36 months after the last contribution for a member who has settled abroad and is not expected to return to covered employment. The taxability of EPF withdrawal turns on the five-year continuous-service test under the Income-tax Act.

NSC (National Savings Certificate) is governed by the National Savings Certificate (VIII Issue) Scheme. The rule here is the strictest: a non-resident is not permitted to hold an NSC. If you bought NSCs while resident and then became an NRI, you may hold them until the original maturity date, but you cannot reinvest or buy fresh certificates.

On the income-tax side, the interest and withdrawal consequences are governed by the Income-tax Act. Note the form-name change you will meet at withdrawal: your consolidated TDS statement is Form 26AS (now Form 168 under the Income-tax Act, 2025), and any remittance of proceeds abroad runs through Form 15CA (now Form 145 under ITA 2025) and, where a CA certificate is required, Form 15CB (now Form 146 under ITA 2025). Residential status itself is tested under Section 6 — the same section number in both the ITA 1961 and the ITA 2025 — and the new Act describes the relevant period as the "Tax Year" rather than "Previous Year" or "Assessment Year."

The reason the WhatsApp shortcut ("close everything") is so sticky is that it sounds prudent and removes the need to learn three separate rule-books. But the three schemes diverge precisely on the actions that matter most: opening, contributing, extending, and reinvesting. A rule that bans opening (PPF, NSC) is not the same as a rule that bans continuing. And a rule about when interest stops accruing (EPF inoperative status) is different again from a rule about when interest becomes taxable (the five-year service test). Collapsing all of these into "just close it" routinely makes people forfeit exempt, market-beating interest they were legally entitled to keep.

Practical implications for NRIs

Take a concrete case. Priya opened a PPF account in April 2015 while working in Pune. It matures in the financial year (Tax Year) 2030-31. She moved to Dubai in 2023 and is now an NRI. Priya can keep contributing up to ₹1.5 lakh a year until the 2030-31 maturity, and the interest — currently in the 7.1% range — remains exempt under Indian law. What she cannot do is roll the account into a fresh five-year block in 2030. On the maturity date she must close it and remit or retain the proceeds.

Now contrast Arjun, who opened his PPF account in 2016, hit 15 years recently and — on the advice of a relative — submitted Form H to extend it for five more years after he had already become an NRI. That extension is invalid. His account is now irregular, and the post-maturity period risks earning the Post Office Savings Account rate (around 4%) or nothing at all, not the headline PPF rate. The "extension" cost him roughly 3 percentage points a year on a seven-figure balance.

On EPF, the trap is silence. Meera left her Bengaluru employer in 2021 and moved to Canada without withdrawing her PF. Her account earned interest until late 2024 — 36 months after her last contribution — and then went inoperative. The interest credited up to the inoperative date stays exempt, but interest is no longer accruing, and any interest credited after the date of leaving service is itself taxable in her hands. If she withdraws before completing five years of continuous service, the entire accumulated balance becomes taxable, with TDS deducted: typically 10% if she has furnished a valid PAN, and a much steeper 30%-plus rate if she has not. For an NRI, the practical filing route is ITR-2, claiming any treaty relief separately.

On NSC, the issue is reinvestment. NSCs bought before you left India can run to maturity, and the interest accrues and is deemed reinvested each year. But the moment a certificate matures, an NRI cannot buy a new one. The interest is taxable as "income from other sources" in the year it accrues, and at maturity the post office does not offer the resident's reinvestment facility to a non-resident holder.

It also helps to see the three side by side. On opening a new account, all three say no to an NRI — PPF, EPF (you cannot start a fresh PF without covered Indian employment), and NSC are closed to non-residents. On continuing an existing account, PPF says yes until maturity, EPF says the balance survives but stops earning after 36 months idle, and NSC says hold-to-maturity only. On extending or reinvesting, all three say no: PPF cannot be rolled into a new five-year block, an inoperative EPF cannot be revived from abroad, and NSC proceeds cannot be ploughed back. On taxability of interest, PPF interest stays fully exempt, EPF interest is exempt up to the date you cease employment and taxable thereafter, and NSC interest is taxable every year as it accrues. Holding that grid in your head prevents almost every costly error.

One further nuance returning NRIs miss: your status itself can change again. If you move back to India permanently, you may regain resident or RNOR status, at which point an EPF account tied to renewed Indian employment can resume contributions, and the PPF extension rules that were closed to you as an NRI may reopen if you are resident at the relevant maturity date. The accounts do not have memory of your worst year — they follow your status in the current Tax Year. That is exactly why Step 1 below is to fix your status before you touch anything.

Step-by-step: what to do

• Pin down your status first. Apply the Section 6 tests for the current Tax Year before touching any account. Your status, not your passport, decides everything below.
• PPF — keep until maturity, never extend. If the account was opened while you were resident, continue or pause contributions as you like, but mark the original maturity date in your calendar and plan to close it then. Do not file Form H or any five-year extension request.
• EPF — decide within 36 months. If you have left Indian covered employment for good, either withdraw before the account turns inoperative or accept that interest stops. To avoid full taxation, check whether you have completed five years of continuous service (counting transfers between employers). If yes, withdrawal is exempt; if no, expect TDS.
• NSC — hold to maturity, do not reinvest. Let existing certificates run, declare the annual accrued interest, and at maturity take the proceeds into your NRO account rather than rolling them over.
• Handle the money correctly at exit. Maturity and withdrawal proceeds for an NRI are credited on a non-repatriation basis to an NRO account. To remit abroad, file Form 15CA (Form 145 under ITA 2025), and obtain Form 15CB (Form 146) from a chartered accountant where the payment crosses the certification threshold.
• Reconcile your TDS. Before filing ITR-2, pull Form 26AS (now Form 168 under ITA 2025) and match every TDS entry against your interest and withdrawal figures so you can claim full credit.

FAQ

Q: I became an NRI three years ago but kept contributing to my PPF. Is that allowed?
Yes. A PPF account opened while you were resident may be continued on a non-repatriation basis until its original 15-year maturity, including fresh annual contributions up to ₹1.5 lakh. The only bars are opening a new account and extending beyond the original maturity.

Q: Will I lose interest already credited to my EPF if the account goes inoperative?
No. Interest credited up to the inoperative date (36 months after your last contribution) stays in the account. What stops is future accrual — after that date the balance no longer grows. Separately, interest credited after you cease employment is taxable even though it was earned in a PF account.

Q: I have NSCs maturing next year. Can I reinvest the proceeds in new NSCs?
No. A non-resident cannot purchase National Savings Certificates. You may hold the existing certificates to maturity, but the proceeds must be taken out — typically into an NRO account — and cannot be rolled into fresh NSCs.

Q: Is PPF maturity money taxable for an NRI, and can I send it abroad?
The PPF maturity amount remains exempt from Indian income tax. It is credited on a non-repatriation basis to your NRO account; to remit it overseas you use the NRO remittance route with Form 15CA (Form 145 under ITA 2025) and, where required, a CA-certified Form 15CB (Form 146), within the permissible annual limit.

Closing

PPF: keep it, never extend it. EPF: act within 36 months and watch the five-year service test. NSC: hold to maturity, never reinvest. The single most expensive mistake is treating all three the same — or extending an account the law no longer lets you hold. For your specific situation, book a consultation at harunraaj.com.

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