PPF, NPS, and PMS for NRIs: What's Allowed and What Isn't

The Public Provident Fund (PPF) is closed to NRIs at the point of account opening -- once you become an NRI, you cannot open a fresh PPF account. If you already had one before your residential status changed, though, you are not forced to close it: it can continue to run through its original 15-year maturity term, still earning the government-declared interest rate, and that interest remains tax-free in India under the same Exempt-Exempt-Exempt treatment residents get.

Two practical limits apply once your status changes. First, unlike a resident, an NRI cannot extend the account in the usual 5-year blocks once it matures -- it must close at the end of its original 15-year term. Second, while the interest stays tax-free in India, it may still be taxable in your country of residence under that country's own tax law -- for a US-resident NRI, for instance, this is a foreign tax question entirely separate from India's treatment and worth a conversation with a local tax advisor there, not something this India-focused guide can answer.

The National Pension System (NPS) is more welcoming than PPF, with an important distinction that trips people up: NRIs -- meaning Indian citizens who live abroad -- CAN open and contribute to NPS, at the same 18-85 age eligibility as resident Indians. But Overseas Citizens of India (OCIs) and Persons of Indian Origin (PIOs) -- people of Indian origin who hold FOREIGN citizenship, not Indian citizenship -- are explicitly excluded, as are Hindu Undivided Families (HUFs).

This is a citizenship test, not a residency test -- so the deciding question is not "do you live in India" but "do you hold an Indian passport." An Indian citizen working in Dubai or Toronto qualifies; a US or Canadian citizen of Indian descent holding an OCI card does not, regardless of how strong their ties to India are otherwise.

Portfolio Management Services (PMS) -- where a professional manager runs a customized equity portfolio on your behalf, rather than pooling your money into a standard mutual fund scheme -- is open to NRIs, but through the same PIS (Portfolio Investment Scheme) account structure used for direct stock trading, plus a trading and demat account, with the portfolio manager holding operating rights over all three.

The barrier is not eligibility -- it is the price of entry: SEBI mandates a minimum investment of ₹50 lakh for PMS, roughly USD 60,000 at typical exchange rates, which puts it well out of reach for most retail NRI investors and firmly in high-net-worth territory. Management fees also run higher than a typical mutual fund, up to roughly 2.5% of the investment depending on the provider.