The GPF is a retirement savings scheme available to government employees in India. Here are some key features:
The General Provident Fund (GPF) is overseen by the Department of Pension and Pensioner’s Welfare under the Ministry of Personnel, Public Grievances and Pensions.
Government employees can subscribe by contributing a portion of their salary, as outlined on pensionersportal.gov.in.
GPF currently offers an interest rate of 7.1%.
Monthly contributions are mandatory unless the employee is under suspension.
Subscriptions stop three months before the employee’s retirement.
The final GPF balance is paid immediately upon retirement—no separate application is required.
At the time of joining, the subscriber must nominate one or more family members to receive the balance in the event of their death.
On the subscriber’s death, the nominee may also receive an additional amount equal to the average balance over the last three years, up to a maximum of Rs. 60,000, provided the subscriber had completed at least 5 years of service.
Additional read: What is GPF interest rates
Benefits of General Provident Fund
The General Provident Fund (GPF) offers a host of benefits to government employees in India, making it a popular retirement savings and investment option:
- Secure retirement: GPF acts as a reliable retirement corpus, providing a steady income stream after the cessation of employment. Regular contributions throughout the service period accumulate, along with accrued interest, to ensure a financially secure retirement.
- Guaranteed returns: GPF offers a fixed interest rate that is determined by the government and revised periodically. This assures stable and predictable returns on your investment, eliminating the risk associated with market volatility.
- Tax benefits: Contributions made to GPF are eligible for tax deductions under Section 80C of the Income Tax Act, up to the specified limit. Additionally, the interest earned on your GPF balance is entirely tax-free.
- Loan facility: GPF subscribers can avail loans against their accumulated balance for various purposes like education, medical treatment, home construction, etc., at relatively lower interest rates compared to other loan options.
Eligibility for Opening GPF Account
The General Provident Fund (GPF) is a retirement savings scheme primarily available to specific groups of employees in India:
- All permanent government employees.
- Temporary government employees after one year of continuous service.
- Government employees re-employed after retirement.
Also Read: Provident Fund Meaning
How to open your GPF account
- Contact your department’s DDO (Drawing and Disbursing Officer) to inquire about the GPF account opening process and the necessary documents.
- Fill in the form with your personal details (name, designation, date of joining, etc.) and specify what percentage of your salary you want to contribute to GPF.
- Your DDO will review the form and send it to the Accountant General's (AG) office along with supporting documents.
- The AG will create your GPF account and assign it a unique number, which you will receive for your records.
- Your chosen contribution percentage will be automatically deducted from your monthly salary and deposited into your GPF account.
How does GPF operate?
The General Provident Fund (GPF) operates as a government-managed savings scheme for eligible employees. A fixed percentage of their salary, is deducted each month as their contribution. The government also contributes an equal amount, effectively doubling the savings rate.
This accumulated amount earns annual interest, determined by the government and usually higher than regular savings accounts. Upon retirement, resignation, or death, the entire GPF balance, including contributions and accrued interest, is payable to the employee or their nominee. Additionally, GPF subscribers can avail loans and partial withdrawals under specific conditions.
Additional read: Difference between GPF and PPF
GPF Contribution Amount
The subscriber decides the GPF contribution amount. However, the minimum contribution must be at least 6% of the employee’s total salary, while the maximum can go up to 100% of the salary.
Advances from the general provident fund
Subscribers can potentially request an advance from their accumulated balance for specific purposes, including:
- Education: Cover education-related expenses for self or dependent family members.
- Medical emergencies: Address unexpected medical costs.
- Marriage: Finance wedding costs for self or any dependent family member.
- Housing: Help purchase land for a home or the construction of a home.
While GPF advances can be helpful, they come with restrictions on purpose and potential delays. Fixed deposit offer greater flexibility. You can select FD tenure to match specific financial goals like education or a down payment, ensuring funds are available when needed without the need to seek a GPF advance.
A. Advance limits
Subscribers can typically receive an advance of up to:
- 12 months of their basic salary, or three-fourths of their current GPF balance (whichever is less).
- In certain circumstances, higher advances may be authorised.
B. Quick processing and easy repayment
- Approval: Expect your advance to be approved within 15 days of application
- No interest: GPF advances are interest-free.
Additional information: You can request multiple advances during your career, even if you are still repaying for previous one.
Also Read: What is Employee Provident Fund (EPF)
Maturity and withdrawal process of GPF
A GPF account reaches maturity when the government employee retires or superannuates.
Withdrawals are allowed on specific grounds, provided the employee has completed 10 years of service or is within 10 years of retirement—whichever occurs first—while still in government service.
If the employee resigns or leaves government service at any point, the entire GPF balance becomes withdrawable, regardless of tenure.
In the event of the subscriber’s death, the accumulated GPF amount is released to the nominated beneficiary.
Difference between GPF and Bajaj Finserv Digital FD
Parameter
|
GPF
|
Bajaj Finance Digital FD
|
Interest rates
|
7.1%
|
Up to 7.30% p.a.
|
Maturity period
|
Till retirement
|
60 months |
Minimum deposit
|
6% of the basic salary
|
Rs. 15,000 |
Maximum deposit
|
100% of the basic salary
|
Rs. 3 crore |
Conclusion
The General Provident Fund serves as a crucial retirement savings pillar for millions of government employees in India. It is government backed with guaranteed returns, and tax benefits making it an attractive and reliable investment option. By understanding it’s features and strategically integrating it with your financial plan, you can build a strong foundation for long-term security.
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