You opened a PPF account in India because the returns are tax-free. Then you moved to the US, and now you are wondering if that tax-free status still holds. It often does not.
Once you become a US tax resident, the US taxes your income from everywhere in the world, including your Indian retirement accounts. So the real question for many NRIs is not just whether a PPF for an NRI is a good idea, but whether your PPF, EPF and NPS are taxable in the US at all.
The short answer is that India and the US treat these accounts very differently. This guide walks through how each account is taxed in both countries, shows the differences in one table, and explains what you must report to the IRS.
How the US taxes your Indian retirement accounts
If you hold a green card, you are a US citizen, or you pass the substantial presence test, you are a US tax resident. That status comes with one big rule. You report and pay US tax on income from every country, not just the US.
This is where many NRIs get caught. In India, accounts like PPF, EPF and NPS are built to grow with little or no tax. The US does not see them the same way. To the IRS, these are foreign financial accounts that earn income, and that income is taxable.
The US also taxes most of this growth as it accrues. That means the interest your PPF earns this year can be US-taxable this year, even though you will not touch the money for another decade. India taxes many of these accounts only at withdrawal, or not at all. The US does not wait.
You might expect the India-US tax treaty to protect you. For US residents and citizens, it usually does not. The treaty has a saving clause that lets the US tax its own residents and citizens as if the treaty were not there. So the tax-deferred shelter you enjoy in India rarely carries over. The same logic applies to other India-sourced income. For example, Indian fixed deposits are taxed in the US on the interest they earn each year.
Is your PPF taxable in the US?
PPF tax in India
In India, the Public Provident Fund, or PPF, is about as tax-friendly as it gets. Your contributions qualify for a deduction, the interest is exempt under Section 10(11) of the Income Tax Act, and the maturity amount is tax-free. Nothing you earn inside a PPF is taxed in India.
PPF tax in the US
The US treats your PPF very differently. The interest your PPF earns is taxable as ordinary income in the US, and it is taxable each year as it accrues. So even if the money sits locked in your account in India, you report that interest on your US return.
This surprises almost every NRI, because the account pays nothing in India. Being tax-free in India does not make your PPF tax-free in the US. If you are a US tax resident, your PPF interest is taxable in the US, full stop.
There is one open question. Some tax professionals argue a PPF should be treated as a foreign trust, which would mean extra forms like Form 3520 and Form 3520-A. Most treat it as a regular foreign financial account that needs only standard reporting. The IRS has not settled this, so it is worth getting advice before you file.
Can you keep a PPF as an NRI?
If you opened your PPF while you were a resident, you can keep it until it matures at the end of its 15-year term. You can keep contributing within the usual limit of Rs 500 to Rs 1.5 lakh a year. What you cannot do is extend it in 5-year blocks the way residents can, and you cannot open a new PPF once you are an NRI. This holds whether you are on an H1B visa, a green card, or any other status abroad. When the account matures, the proceeds go to your NRO account.
Is your EPF taxable in the US?
EPF tax in India
The Employees' Provident Fund, or EPF, is the retirement fund most salaried workers in India build up through their job. In India, your EPF withdrawal is tax-free if you have completed five years of continuous service. Pull the money out before five years and it becomes taxable, with TDS of 10% if the amount is above Rs 50,000.
The interest is mostly tax-free too. Since the Finance Act of 2021, interest on your own contributions above Rs 2.5 lakh in a year is taxable in India. For most people that limit is never crossed, so EPF interest stays exempt.
EPF tax in the US
In the US, your EPF is back on the tax radar. The interest it earns is generally taxable in the US as it accrues, the same way your PPF interest is. Employer contributions can also be treated as income to you in the year they are made, depending on how your advisor reports the account.
Some professionals argue that EPF behaves like a social security scheme and should be taxable only in India under the pension article of the treaty. Others disagree. The IRS has issued no formal ruling, so this remains an unsettled area. The careful approach is to report the income and keep records that support whatever position you take. So yes, in most cases EPF interest is taxable in the USA for a US tax resident.
Is your NPS taxable in the US?
NPS tax in India
The National Pension System, or NPS, is India's market-linked retirement scheme. In India it gets partial tax relief. At retirement, up to 60% of the corpus can be withdrawn tax-free, and the rest must buy an annuity, which is taxed as income when you receive it.
NPS tax in the US
In the US, the gains inside your NPS are generally taxable as they grow. NPS invests in equity and debt funds, and the US taxes that growth rather than letting it build untouched.
NPS has a slightly stronger treaty argument than PPF, because it looks more like a pension. The pension article of the India-US treaty can let some pension income be taxed only in the country where it arises. Even so, the saving clause limits how far this helps a US resident or citizen, so do not assume your NPS is tax-free in the US. If you are still deciding, you can open an NPS account as an NRI if you are between 18 and 70, but weigh the US tax cost first.
EPF vs PPF vs NPS: India tax versus US tax at a glance
Here is how the three accounts compare across both countries. Use it as a quick reference, then read the detail above for your specific account.
| Account | Tax in India | Tax in the US | US Reporting |
|---|---|---|---|
| EPF | Withdrawal tax-free after 5 years of continuous service; interest on own contributions above ₹2.5 lakh a year is taxable | Interest generally taxable each year as it accrues; employer contributions may be treated as income | FBAR if over the threshold; Form 8938 if asset limits are met |
| PPF | Fully tax-free; interest exempt under Section 10(11) and maturity tax-free | Interest taxable each year as ordinary income, even though India taxes nothing | FBAR if over the threshold; Form 8938 if asset limits are met |
| NPS | Up to 60% of corpus tax-free at retirement; annuity portion taxed as income | Growth generally taxable as it accrues; limited treaty relief possible | FBAR if over the threshold; Form 8938 if asset limits are met |
All three accounts give you a tax break in India that the US does not match. For a US tax resident, the income inside these accounts is usually taxable in the US, and the bigger job is often the reporting that comes with them.
How to report EPF, PPF and NPS to the IRS
Paying tax on the income is only half the work. The US also wants to know these accounts exist.
The first form is the FBAR, the Report of Foreign Bank and Financial Accounts. If the total value of all your foreign accounts added together crosses $10,000 at any point in the year, you must file FinCEN Form 114. This is not filed with your tax return. It goes to the Treasury's Financial Crimes Enforcement Network, and it is due on April 15 with an automatic extension to October 15. Most NRIs with an EPF, PPF or NPS plus a normal Indian bank account will cross this line, so plan to file an FBAR each year. You can read the rules for foreign accounts on the official IRS FBAR page.
The second form is Form 8938, the FATCA disclosure. The thresholds depend on where you live and how you file. If you live in the US, you file once your foreign assets pass $50,000 on the last day of the year or $75,000 at any time, rising to $100,000 and $150,000 if you are married filing jointly. If you live abroad, the limits are far higher, at $200,000 and $300,000 for single filers and $400,000 and $600,000 for joint filers. When you cross them, you report them on Form 8938.
If your account is ever treated as a foreign trust, Form 3520 and Form 3520-A can also apply. This is rare for these accounts, but it is the reason advice matters.
Here is how it plays out. Priya is a green card holder in California with a PPF account in India. This year her PPF earns Rs 80,000 in interest. India taxes none of it. The US still expects Priya to report roughly $960 of interest income on her return, and to list the account on her FBAR. She pays no India tax to credit, so the full amount is taxed in the US. If she had paid India tax on this income, she could claim a foreign tax credit and avoid being taxed twice.
Conclusion
Being tax-free in India does not make your PPF, EPF or NPS tax-free in the US. Once you are a US tax resident, the income inside these accounts is usually taxable in the US, and you likely need to report the accounts through the FBAR and Form 8938.
The smart move is to track the interest your PPF and other accounts earn each year, file the right forms, and claim a foreign tax credit where you can.
If your situation feels unclear, do consult an NRI Financial Advisor
Frequently asked questions
Is PPF taxable in the US for NRIs?
Yes, for NRIs who are US tax residents. The interest your PPF earns is taxable in the US as ordinary income, and it is taxed each year as it builds up, not just when you withdraw.
This is true even though India charges no tax on PPF interest or maturity. You also report the account on your FBAR if your foreign accounts cross $10,000.
Can I keep my PPF account on an H1B visa?
Yes. If you opened the PPF while you were a resident of India, you can keep it and contribute until it matures at 15 years, whether you are on an H1B or any other status.
You cannot open a new PPF account once you are an NRI, and you cannot extend an existing one in 5-year blocks. Remember that the interest is still taxable on your US return while you are a US tax resident.
What happens to my NPS account if I become an NRI or OCI?
Your NPS account stays active. NRIs and OCI cardholders aged 18 to 70 can hold and contribute to an NPS Tier I account, funded through an NRE or NRO account.
You do not have to close it when your status changes. Keep in mind that the growth inside your NPS can be taxable in the US each year while you are a US tax resident.
Is NPS tax-free for NRIs?
Not in the US. In India, NPS gets partial tax relief, with up to 60% of the corpus tax-free at retirement and the annuity portion taxed as income. In the US, the growth inside the account is generally taxable as it accrues.
The pension article of the treaty offers some argument for relief, but the saving clause limits it for US residents, so do not count on full exemption.
How can I avoid being taxed twice on my EPF, PPF and NPS?
You use the foreign tax credit. If you pay tax in India on any of this income, you can usually claim that tax as a credit against your US tax on the same income, which stops the same rupee being taxed twice. Where India charges no tax, like PPF interest, there is nothing to credit, so the US tax applies in full.
You can also claim relief under the DTAA in some cases, though the treaty's saving clause limits what US residents can use.