What is GPF? Benefits of General Provident Fund
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A type of Provident Fund (PF), the General Provident Fund, also called GPF is basically for the government employees of India. Throughout the employment period, these employees contribute a certain percentage of their salary to the GP fund account. The total amount that is accumulated in the years of employment, is provided to them at the time of retirement.
What is GPF and how does it work?
There are several types of provident funds and General Provident Fund is one of them. It can be called a saving tool for government employees. All through the years of the employment of government employees, a percentage of their salary is deducted to be contributed to the GPF account. When they retire, the GPF fund is provided to them, along with the interest amount that has been accumulated in all these years.
Features of General Provident Fund
Some of the features of the General Provident Fund are mentioned herein below:
- Government employees can start making GPF contributions from their salary
- While opening a GPF account, you have to make one of your family members a nominee. In your absence and behalf, the nominee will be able to withdraw the funds. He/she would not need any kind of documents to do that
- As the account holder or subscriber retires, instruction is issued on an immediate basis to release the accumulated money. There is no need of applying for the money from the account holder’s side
- If the account holder passes away, the nominee will get the funds along with the additional amount for the next three years. Nevertheless, the additional amount paid to the nominee is not more than INR 60,000.
As per the GPF contribution rules, the nominee will be provided the amount only if the account holder was in service for at least five years.
The interest rate of GPF
The interest rate of GPF is 7.1% at present. The Budget Division of the Department of Economic Affairs at the Ministry of Finance issues the notification of the interest rate of GPF, which is updated each quarter. An interest rate of 7.1% is applicable in various provident funds such as
- The General Provident Fund (Central Services)
- The State Railway Provident Fund
- The Contributory Provident Fund (India)
- The All India Services Provident Fund
- The General Provident Fund (Defence Services)
- The Indian Ordnance Department Provident Fund
- The Indian Naval Dockyard Workmen’s Provident Fund
- The Indian Ordnance Factories Workmen’s Provident Fund
- The Armed Forces Personnel Provident Fund
- The Defence Services Officers Provident Fund
Eligibility for General Provident Fund
To open a GPF account, an individual has to meet certain eligibility criteria. Here are a few of them mentioned below:
- The account holder has to be an Indian citizen and a government employee
- A government employee who belongs to a certain salary class can open a GPF account
- A certain percentage of the GPF deduction in salary is charged, which is at least 6% of the monthly salary.
Difference between GPF, EPF, and PPF
Parameters |
EPF | PPF | GPF |
Abbreviation |
Employees’ Provident Fund | Public Provident Fund | General Provident Fund |
Eligibility criteria |
People working in any company that has 20 or more employees | Include all the Indian resident individuals | Only Government employees |
Interest rates |
8.5% | 7.1% | 7.1% |
Maturity period |
Up to 58 years of age | 15 year period | Until retirement |
Minimum Deposit range |
10% or 12% of the salary or INR 1800 | INR 500 per year | 6% of their monthly salary |
Maximum Deposit range |
It is voluntary, no completion is made | INR 1.5 lakhs per year | 100% of their monthly salary |
Premature closure |
Being unemployed for more than 2 months | Only after 5 years of maturity, for educational and medical purposes | If the individual quits their government job |
Steps to open a GPF account
If you want to open a GPF account, here are some steps that you have to follow:
- The government employees can find a form of GPF fund which they have to fill up
- The application is then submitted to the Account General of the state
- Once it is approved, an account number is provided to the account holder/subscriber
- Once it is done, the deduction from the monthly salary of the subscriber is then specified. The amount that is deducted is made to the DDO (Drawing and Disbursing Officer).
After each financial year, the account holder/subscriber gets an annual statement of the GPF fund which include break ups such as debits (loan), credits, interest accumulated (7.1 % interest rate), and closing balance.
FAQs on General Provident Fund - Benefits and how it works?
A GPF, General Provident Fund is a type of Provident Fund that is only for Government employees. A certain percentage of their salary is deducted every month, which along with interest is provided to them after their retirement.
A government employee can open a GPF account. Each month a certain amount f money is deducted from the employee’s salary that is contributed to the GPF account.
A minimum of 6% of the salary to up to 100% of the salary can be contributed to a GPF account.
The maximum amount that can be contributed to a GPF account is up to 100% of the salary.
A GPF is only for Government employees, while an EPF account can be opened by any employee who works in an organization that has 20 or more employees. The interest rate of GPF is 7.1%, while the interest rate of EPF is 8.5%.
Author Bio
Paybima Team
Paybima is an Indian insurance aggregator on a mission to make insurance simple for people. Paybima is the Digital arm of the already established and trusted Mahindra Insurance Brokers Ltd., a reputed name in the insurance broking industry with 17 years of experience. Paybima promises you the easy-to-access online platform to buy insurance policies, and also extend their unrelented assistance with all your policy related queries and services.
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