What Is GPF- General Provident Fund

General provident funds help government employees build a sufficient retirement corpus that will give them a sense of financial security. In short, GPF is a provident fund only available to the government employees in India. Pension funds, in contrast, include aspects of both lump sum and monthly pension payments.  When a subscriber leaves government service or retires, the GPF amount is available for withdrawal. He or she may also take partial withdrawals after 15 years of service or within ten years of retirement.

Gratuities and Provident Funds function differently, although both contain lump sum distributions after work. The former is a defined benefit plan, while the latter is a defined contribution plan. The Provident Fund is a government-managed retirement savings program for all salaried workers who can contribute an amount of their monthly pension fund. We can readily access the monthly funds accrued when we retire or leave our job. This article aims to tell you all about what GPF is and how it ensures financial freedom, especially for a government employee.  

What Is GPF?   

GPF, or General Provident Fund, is a mandatory savings scheme only for government employees.

Employees contribute a monthly amount deposited into an account using the current applicable interest rate for the GPF.

As a result, at retirement, the employee receives the total amount accrued during the employment time. In addition, the General Provident Fund interest rate is updated following governmental conditions. According to the GPF interest rate year-wise list, the GPF’s current interest rate is 7.1%.   

Also Read: What is the Difference Between Bill Discounting and Invoice Discounting

Features Of General Provident Fund   

1. The Government Provident Fund is managed by the Department of Pension and Pensioner Welfare within the Union Ministry of Personnel, Public Grievances, and Pensions.

2. The GPF is available to all temporary and permanent government employees by contributing a certain percentage of their salary.   

3. While joining the GPF, employees must choose a family member as their nominee. The nominee of the employees’ fund may be one or more specific people. Besides, the employees decide how much of the due sum will be divided among the nominees in the event of their death.   

4. The GPF Fund’s employees receive a 7.1% interest rate on deposited funds.  

5. The GPF Fund’s money is deposited into the employees’ accounts after their retirement from the government office.   

Also Read: EPF vs PPF: Which one is a better investment option?

How To Open A GPF Account   

Understanding the General Provident Fund (GPF) and how a GPF account can be opened is essential. First, we fill out the proper paperwork and submit it to the Accountant General of the appropriate state.  They will then assign an account number. Also, a monthly deduction is prescribed from employees’ salaries to the DDO (Drawing and Disbursing Officer).

At the end of the Financial Year, the DDO will send the employee a summary of credits and debits (on the interpretation of the loan) and the closing balance, including any accrued interest. Additionally, the AG’s office of the relevant state maintains the GPF account.   

Therefore, the necessary paperwork must be filled out and delivered to the accountant general of the respective state for the successful opening of a GPF account.   

Eligibility Criteria For GPF   

Anyone who meets the requirements listed below is eligible to contribute to the GPF Account:   

• General Provident Fund is applicable for government employees based in India under a specified salary rank.   
• A private sector worker is not eligible for the General Provident Fund.  
• To become a member of the General Provident Fund, every employee has to pay a minimal amount of their salary as a contribution.   

Withdrawal Process Of GPF   

• The GPF account matures at the time of the particular government employee’s retirement. The only need to withdraw an employee’s accumulated GPF funds is to complete 10 years of service or within 10 years of retirement. This is only applicable if the worker has not left the government service.
• Regardless, If the employee quits the job at any stage, they become eligible to withdraw the GPF balance irrespective of their service tenure.
• Lastly, the GPF sum will be paid to their nominee if the employee passes away.
• Also Read: What is PPF – Public Provident Fund

Also Read: What are the Benefits of Public Provident Fund (PPF)?

GPF vs EPF vs PPF Comparison

These three differ primarily because GPF is a provident fund account for government employees, and employees contribute a portion of their salaries to the account. As a long-term investment, the PPF, on the other hand, offers tax-free dividends and interest. Because of its official backing, borrowing money against it is very simple. The employee can contribute up to 12% of their monthly basic pay to the EPF, a provident fund, by contributing a percentage of their salary to the account. 

Also Read: PPF (Public Provident Fund): Deposit Limit, Eligibility and Tax Benefits

The Bottom Line   

In conclusion, the General Provident Fund (GPF) was appointed as a mandatory savings plan for government workers only. GPF is an asset after retirement and allows employees to save a considerable sum for their golden years. It is perfect for assisting government employees in saving money for future goals such as child’s education fees, marriage expenses, house loans, or even a medical emergency.

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