An NRI can’t open PPF account

S.C. Vasudeva

Q. My son had worked for 4 years and 10 months where EPF was deducted and deposited with the EPF Department. Earlier also, he had worked in some other organisation and his EPF was credited to his account in the EPF Department. My son got transferred the balance of the above two accounts into the new EPF account. He later resigned the job and went for higher education to the US and became an NRI. Now, he has withdrawn the balance and the EPF Department has deducted TDS. Please clarify on the following: 

i) Whether the department is justified in deducting TDS since the total service combined together was more than five years.

ii) As to whether the EPF withdrawal amount during 2017-18 will form part of his income in that year or some other treatment is required. My son is now an NRI.

iii) As to whether the amount deposited by him into PPF account will be available for rebate under Section 80C. — JS Parmar

A. Replies to your queries which are given hereunder are based on the presumption that your son had been contributing to a recognised provident fund.

(a) The Employee Provident Fund Department should not have deducted TDS in respect of balance lying in your son’s provident fund account as his service period is more than 5 years. You will have to file his income-tax return to claim the refund with regard to the tax deducted at source. 

(b) The amount withdrawn from Employees Provident Fund after the completion of 5 years of service would not be taxable.

(c) An NRI cannot open a Public Provident Fund account and if there is an existing account, and a person has became Non-Resident during the currency of the maturity period, the account shall be deemed to be closed from the day such person becomes Non-Resident and interest from that date shall be paid at the rate applicable to a post office savings account. Thus, an NRI would not be entitled to claim deduction under Section 80C of the Income-tax Act 1961 (The Act) in respect of any contribution to PPF account after he becomes an NRI.

Q. My daughter opened a PPF account in 2003. She went to the US and became a US citizen. The account got matured now in 2018. The post office is asking for her Aadhaar and PAN for clearing the payment but she does not have Aadhaar and PAN. She has been regularly depositing money from 15 years through me. How can this payment be realised from the post office in Chandigarh. Please advise. — SP Singal

A. It is not possible for an NRI to open a Public Provident Fund account. However, in case a person who is a resident had opened an account under the PPF Scheme and subsequently becomes a non-resident during the currency of the maturity period, the account shall be deemed to be closed 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 savings account up to the last date of the month preceding the month in which the account is actually closed. She does not require an Aadhaar card being an NRI but a PAN card will have to be obtained by her to prove her identity for the purpose of withdrawal of the amount. The account will have to be transferred to Chandigarh post office before the amount can be withdrawn from the said post office.

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