What is General Provident Fund (GPF)

GPF or General Provident Fund is a type of PF account that is available only for all government employees in India. Basically, it allows all government employees to contribute a certain percentage of their salary to the General Provident Fund. And the total amount that is accumulated along with interest earned throughout the employment term is paid to the employee at the time of retirement.

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What is the General Provident Fund (GPF)?

The full form of GPF is the General Provident Fund. It is a savings and pension plan introduced in 1960 for government employees in India. GPF serves as a long-term investment option that allows you to contribute a portion of your salary each month. The accumulated funds, along with interest are provided to you upon retirement. 

Features of General Provident Fund (GPF)

The key features of the GPF pension plan are mentioned in the following table:

Feature Details
Interest Rate GPF currently offers a 7.1% p.a. interest rate.
Contributions Minimum 6% of basic salary, maximum 100% (employee choice)
Subscription Fee Monthly subscription fee is required, except during your suspension periods.
Subscription Halt Before Superannuation Subscriptions to GPF are stopped 3 months before superannuation, as per the Government of India pension portal.
Final Payment Application No application is required for final payment from the fund upon retirement.
Withdrawals Partial allowed after 15 years or 10 years before retirement
Loans Available for various purposes like house, education, and medical
Nomination for Death Benefit You must nominate a family member during fund registration for death benefit.
Death Benefit Calculation Nominees are entitled to an additional payment equal to the average balance over 3 years, up to a maximum of Rs. 60,000.
Eligibility for Death Benefit You must be actively working for at least 5 years to be eligible for death benefit.
Management Entity GPF is managed by the Department of Pension and Pensioner’s Welfare under the Ministry of Personnel of the Government of India.
Tax Benefits Deductible under Section 80C of the Income Tax Act

General Provident Fund (GPF) Interest Rate

The GPF interest rate for the first quarter of 2024 (January-March) has been set at 7.1% p.a. This rate was announced by the Ministry of Finance in a notification issued on January 2, 2024.

The GPF interest rate is reviewed and revised quarterly by the government. The rate for the current quarter is the same as the rate for the previous quarter (October-December 2023).

NOTE: It is important to note that the GPF interest rate is different from the EPF interest rate. The EPF interest rate for the entire Financial Year (FY) 2023-24 is set at 8.15% p.a.

Eligibility Criteria for GPF Account

You can contribute to the General Provident Fund Account if you fulfil the below-mentioned criteria:

  • Open to central government and specific state government employees.

  • Employees must not have chosen any other government or organizational provident fund scheme.

  • Temporary employees with one year of continuous service qualify for GPF.

  • Compulsory for government employees in specific salary classes.

  • Excluded for employees in private sector companies.

  • Government employees need to contribute a specified percentage of their salary to join GPF.

Exclusion Criteria:

  • Ineligible for employees on deputation outside India.

  • Excluded for employees in private sector companies.

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How the General Provident Fund Works?

You can understand the working of the General Provident Fund (GPF) from the steps mentioned below:

  1. Join the General Provident Fund (GPF):

    If you are a government employee in India, you need to join the GPF. You have to inform your employer of your desire to contribute.

  2. Choose your contribution:

    You can contribute between 6% and 100% of your basic salary each month. Your fund grows faster as you contribute more. 

  3. Make regular contributions:

    Your chosen amount is automatically deducted from your salary every month and deposited into your GPF account.

  4. Earn interest:

    Your GPF account earns interest at a rate fixed by the government. Currently, the GPF interest rate is 7.10% p.a. in January 2024. This interest gets added to your balance every year.

  5. Watch your funds grow:

    Your GPF balance gradually gets accumulated over time, with regular contributions and interest.

  6. Reaching maturity:

    You can access your GPF funds upon retirement or after completing ten years of service (whichever comes later).

  7. Withdrawal options:

    You can choose to withdraw the entire amount as a lump sum or take monthly payments in instalments upon maturity.

  8. Partial withdrawals:

    You can also make partial withdrawals before retirement for specific purposes like medical expenses, children's education, or house purchase.

You may also compare: Saral Pension Yojana

How to Open a GPF Account?

Follow these steps to open a General Provident Fund (GPF) Account:

Step 1: Contact your department's Drawing and Disbursing Officer (DDO). Inquire about the GPF account opening process and required documents.

Step 2: Obtain the "Account Opening Form" (usually provided by the DDO or Accountant General's office).

Step 3: Provide details like name, designation, date of joining, and chosen contribution percentage (6% or 10% of basic salary).

Step 4: Your DDO verifies the form and forwards it to the Accountant General's office (AG) along with relevant documents. The AG assigns a unique GPF account number.

Step 5: You will receive your GPF account number and account information.

Your chosen contribution percentage will be automatically deducted from your salary each month and credited to your GPF account.

Contribution Amount in General Provident Fund (GPF) Account

As per the General Provident Fund (Central Services) Rules, 1960, the minimum contribution to a GPF account is 6% of the basic salary, while the maximum contribution is 100% of the basic salary. However, some state governments and public sector organizations may have different minimum and maximum limits.

Employee's Choice: 

Within the minimum and maximum limits, you can choose how much you want to contribute to your GPF account.

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Advances on GPF Account

The General Provident Fund (GPF) in India allows you to avail advances for various purposes under the following specific conditions:

  • Eligibility:

    • Any subscriber with a minimum of 5 years of service can apply for an advance.

    • The advance amount depends on various factors like your salary, balance in the GPF account, and purpose of the advance.

  • Advances:

    • You can get up to 12 months' pay or three-fourths of the GPF balance, whichever is less.

    • In special circumstances, a 90% withdrawal is possible with sanctioning authority approval.

  • Eligible Advances: You can get an advance for these purposes-

    • Illness of yourself or a dependent family member

    • Expenses for the higher education of children or spouse

    • Meeting wedding expenses of self or dependent children

  • Sanctioning and Credit:

    • Sanctioning authority must approve and credit the advance within 15 days of the request.

    • No documentary proof is needed to raise a claim for GPF advance.

  • Repayment Terms: Amount borrowed must be repaid, with a maximum repayment period of 60 months in instalments.

  • Interest-Free Advances:

    • No interest is charged on GPF advances.

    • Multiple claims for GPF advances are allowed throughout the subscriber's career.

  • Fresh Advance Requests: Even if repaying an existing advance, a request for a new advance can be made.

  • Conditions for Multiple Advances: 

    • If an advance is granted before complete repayment of an existing one, the outstanding amount is added to the new advance.

    • Instalments for recovery are refixed based on the consolidated amount.

Maturity and Withdrawal from GPF Account

The maturity of your General Provident Fund (GPF) Account and the withdrawal process from this account is mentioned below:

  • GPF matures upon your retirement or when you reach superannuation age.

  • Withdrawal is allowed after ten years of service or with ten years left until superannuation, applicable for continuous government service.

  • Resignation allows immediate withdrawal of GPF balance, irrespective of service tenure.

  • Post maturity, you can either withdraw the full balance or choose a monthly pension.

  • In the event of your demise, the GPF balance is paid to the nominee or legal heir.

Difference Between GPF vs. PPF vs. NPS

The following table shows the difference between different pension plans, like the General Provident Fund (GPF) Scheme, National Pension Scheme (NPS), and the Public Provident Fund (PPF) Scheme:

Feature General Provident Fund (GPF) Public Provident Fund (PPF) National Pension Scheme (NPS)
Who can join? Only government employees in India (before Jan 2004) Any Indian citizens (18+) All Indian residents (18-70 years)
Mandatory or Optional? Mandatory Optional Optional
Contribution By government - employee Self-contribution only
  • By employee and employer
  • Voluntary contributions
Minimum contribution 6% of basic salary ₹500 per year ₹1,000 per year
Maximum contribution 10% of basic salary ₹1.5 lakh per year No limit
Tax benefit Deductible under 80C Deductible under 80C Deductible under 80C, additional ₹50,000 under 80CCD(1b)
Interest rate Set by government, currently 7.1% Set by government, currently 7.1% 6% to 15% p.a.* (Market-linked)
Maturity period Retirement 15 years, extendable by 5 years 60 years
Premature withdrawal Allowed only on leaving government service Allowed after 5 years for specific reasons (medical, education)
  • Partial withdrawal allowed after 10 years
  • Full withdrawal at 60 with tax implications
Overall Secure, guaranteed returns, limited access Flexible, tax-friendly, good for long-term savings Potentially higher returns, higher risk, long lock-in, more flexibility

* It is advisable to use an NPS Calculator to estimate your returns from investments in the National Pension Scheme.

In a Nutshell!

The General Provident Fund (GPF) serves as an important financial instrument for government employees. This pension plan facilitates systematic savings and ensures financial security during retirement. This employee-contributory scheme has proven to be a reliable means of long-term wealth accumulation while emphasizing fiscal discipline. With its structured approach, the GPF stands as a cornerstone in promoting financial stability and well-being among government personnel.

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FAQ's

  • What is the difference between PF and GPF?

    PF (usually EPF) is for private/non-government employees. It is mandatory in companies with 20+ employees. The fund is managed by the Employees' Provident Fund Organization (EPFO). GPF is only for government employees, voluntary but with higher contribution limits. Both are retirement savings schemes with tax benefits, but differ in eligibility, contribution pattern, and withdrawal rules.
  • What are General Provident Fund benefits?

    The key benefits of investing in General Provident Fund are as follows:
    • Build a sizable corpus with guaranteed returns (currently 7.1%)

    • Contributions qualify for tax deduction under Section 80C.

    • Access loans for expenses like housing, education, and medical care.

    • Get the full accumulated sum at retirement or withdrawal due to specific reasons.

    • Government-backed scheme with minimal risk.

  • What is GPF in salary?

    GPF, or General Provident Fund, isn't actually a part of your salary itself. It's a type of savings scheme available to government employees in India, similar to the Public Provident Fund (PPF) for private sector employees.
  • How is the General Provident Fund calculated?

    The simplified formula for calculating the accumulated amount in your GPF account after one year is as follows:
    • Total contribution = Employee contribution + Government contribution

    • Monthly interest rate = Annual interest rate / 12

    • Accumulated amount = Total contribution * (1 + Monthly interest rate)^12

*All savings are provided by the insurer as per the IRDAI approved insurance plan.
*Tax benefit is subject to changes in tax laws. Standard T&C Apply
^The tax benefits under Section 80C allow a deduction of up to ₹1.5 lakhs from the taxable income per year and 10(10D) tax benefits are for investments made up to ₹2.5 Lakhs/ year for policies bought after 1 Feb 2021. Tax benefits and savings are subject to changes in tax laws.
+Returns Since Inception of LIC Growth Fund
~Source - Google Review Rating available on:- http://bit.ly/3J20bXZ
^^The information relating to mutual funds presented in this article is for educational purpose only and is not meant for sale. Investment is subject to market risks and the risk is borne by the investor. Please consult your financial advisor before planning your investments.

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