General Provident Fund

Understand how the General Provident Fund can help you achieve a comfortable retirement.
General Provident Fund
3 min
16 July 2024

GPF, which stands for General Provident Fund, is a retirement savings scheme designed specifically for government employees in India. Established in 1960, it provides a long-term investment option where you contribute a portion of your salary each month. Upon retirement, you receive the accumulated funds along with earned interest, ensuring financial security after your working years.

You can consider investing in fixed deposit to diversify your portfolio. FD offer guaranteed returns, flexible tenures, and the potential for competitive interest rates, helping you maximise your retirement savings.

Pro tip

Enjoy higher interest rate with Bajaj Finance Digital FD. Unlock returns of up to 8.65% p.a. by investing for 42 months via website and app.

Key features of General Provident Fund

The GPF is a retirement savings scheme available to government employees in India. Here are some key features:

  • As of January 2nd, 2024, the GPF provides an interest rate of 7.1%
  • You must make regular monthly contributions to your GPF, except if you are suspended from your position.
  • Upon retirement, you will receive your full GPF balance.
  • When joining the GPF, member must nominate someone. The nominee will receive the accumulated balance in case of the member's demise.
  • No application is needed from the subscriber for the final payment from the fund.
  • According to GPF rules, an extra amount, equivalent to the average account balance of the 3 years before the subscriber's death, is given to the eligible person.
  • The maximum amount paid out under this rule is Rs. 60,000. If the subscriber has not worked for at least 5 years, their family won't be eligible for this benefit.

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:

  1. 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.
  2. 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.
  3. 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.
  4. 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 GPF

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.

How to open your GPF account

  1. Contact your department’s DDO (Drawing and Disbursing Officer) to inquire about the GPF account opening process and the necessary documents.
  2. 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.
  3. Your DDO will review the form and send it to the Accountant General's (AG) office along with supporting documents.
  4. The AG will create your GPF account and assign it a unique number, which you will receive for your records.
  5. 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

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 deposits 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.
  • Flexible repayment: You can repay the advance in up to 60 monthly installments.

Additional information: You can request multiple advances during your career, even if you are still repaying for previous one.

Maturity and withdrawal process of GPF

  • Upon resignation: If you resign from your position, you can withdraw your GPF balance regardless of how long you have served.
  • After maturity: Once your GPF matures, you have the choice to withdraw the full balance or receive it as a monthly pension.
  • In case of demise: If an employee passes away, their GPF balance is paid to their designated nominee or legal heir.

Difference between GPF and Bajaj Finserv Digital FD

Parameter

GPF

Bajaj Finance Digital FD

Interest rates

7.1%

Up to 8.65% p.a.

Maturity period

Till retirement

42 months

Minimum deposit

6% of the basic salary

Rs. 15,000

Maximum deposit

100% of the basic salary

Rs. 5 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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Frequently asked questions

What is the limit of GPF subscription for state government employees?

State government employees can subscribe to the General Provident Fund (GPF) with a minimum of 6% of their basic salary, while the maximum limit is set at 100% of their basic salary.

How many times can a government employee withdraw GPF in a year?

Government employees can typically withdraw from their GPF account up to 6 times in a year, subject to fulfilling specific conditions and purposes outlined in the GPF rules.

What is the maximum limit of GPF?

The maximum limit of GPF is Rs. 5 lakh in a financial year.

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Disclaimer

As regards deposit taking activity of Bajaj Finance Ltd (BFL), the viewers may refer to the advertisement in the Indian Express (Mumbai Edition) and Loksatta (Pune Edition) furnished in the application form for soliciting public deposits or refer https://www.bajajfinserv.in/fixed-deposit-archives
The company is having a valid Certificate of Registration dated March 5, 1998 issued by the Reserve Bank of India under section 45 IA of the Reserve Bank of India Act, 1934. However, the RBI does not accept any responsibility or guarantee about the present position as to the financial soundness of the company or for the correctness of any of the statements or representations made or opinions expressed by the company and for repayment of deposits/discharge of the liabilities by the company.

For the FD calculator the actual returns may vary slightly if the Fixed Deposit tenure includes a leap year.