General Provident Fund: Meaning, Rules, and Interest Rates- 2023

Are you a government employee worried about securing your financial future post-retirement? If so, let’s explore the basics of the General Provident Fund (GPF), an exclusive savings scheme tailored for individuals like you. Similar to the Public Provident Fund (PPF), the GPF allows government workers in India to contribute a specified percentage of their salary, fostering a joint effort between the employee and the government. The primary objective of the General Provident Fund is to establish a dependable source of retirement income for government employees.

Upon retirement or resignation, employees can access the accumulated savings in their GPF account. The General Provident Fund offers an attractive interest rate that is updated quarterly, making it an appealing investment for government employees.  Let’s explore the basics of GPF in India, the GPF interest rates, withdrawal rules, and more.

What is GPF- General Provident Fund?

The General Provident Fund (GPF) serves as a long-term savings option for government employees, enabling them to build financial reserves throughout their careers.

Government employees are obliged to contribute a specific percentage of their salary to the GPF, with these contributions deducted monthly. The accumulated amount earns interest at a predetermined rate. The Department of Pension and Pensioners’ Welfare administers this scheme under the Ministry of Personnel, Public Grievances, and Pensions. It gives government employees various advantages, such as tax savings, secure investments, and assured returns.

• The GPF is adaptable, allowing employees to withdraw funds for diverse reasons like weddings, education, or medical emergencies. 
• Interest rates on GPF are periodically revised based on government notifications. 
• General Provident Fund also provides various benefits such as tax exemption, advances, withdrawals, and final settlement.
• According to GPF rules, those eligible to subscribe include all temporary government servants with one year of continuous service, re-employed pensioners (excluding those eligible for the contributory provident fund), and permanent government servants.

Exploring GPF Rules

The GPF rules are the rules and procedures that govern the General Provident Fund scheme for government employees.  

As per the latest GPF rules, individuals meeting the following conditions can enroll in the General Provident Fund:

1. Temporary government employees become eligible after completing one year of continuous service.
2. Permanent government servants are entitled to subscribe to the GPF.
3. Re-employed retired government pensioners can enrol in the GPF.
4. Government employees in establishments falling under the EPF Act, 1952, can subscribe to the GPF.

However, those entering government service post-2004 do not qualify for GPF. Instead, they are covered by the National Pension System (Central Government) or National Pension System (State Government), as applicable.

Eligibility for GPF

To be eligible to contribute to the General Provident Fund (GPF) account, individuals must meet the following criteria:

1. Government Employee and Indian Resident: The individual must be a government employee and a resident of India.
2. Compulsory for Specific Salary Class: GPF is mandatory for government employees falling within a particular salary class.
3. Ineligibility for Private Sector Employees: Employees of private sector companies are not eligible to participate in the General Provident Fund.
4. Contribution Requirement: A government employee becomes a member of the General Provident Fund by contributing a specific percentage of their salary.

Features of GPF- General Provident Fund

1. Current Interest Rate: As of Q3 FY 2023-24, GPF offers an interest rate of 7.1%
2. Membership and Contribution: Government employees can join GPF by contributing is an amount that varies depending on the employee’s category and pay scale. The minimum contribution is 6% of the basic pay, and the maximum is 100% of the basic pay plus dearness allowance. 
3. Monthly Subscription: GPF requires a monthly contribution, except during periods of suspension for the subscriber.
4. Subscription Cessation: According to the pensioners’ portal, GPF subscriptions are halted three months before the superannuation date.
5. Final Fund Payment: No application is necessary for the final fund payment; it is processed automatically upon the subscriber’s retirement.
6. Immediate Retirement Payment: Upon retirement, the final balance is promptly paid to the general provident fund subscriber.
7. Nomination Process: Subscribers must nominate a family member when joining GPF. In the unfortunate event of the subscriber’s untimely death, the nomination grants the right to one or more individuals to receive the accumulated credit fund.
8. Nominee Entitlement: The nominee is entitled to an additional payment equal to the average balance in the deceased’s account over the three years before the employee’s death, as per GPF regulations.
9. Maximum Additional Amount: The maximum additional amount payable under the GPF rule is Rs. 60,000.

GPF Interest Rates 

The General Provident Fund’s interest rate is determined by the Central Government and undergoes an annual review. As of the third quarter of the fiscal year 2023-24, the annual interest rate for the General Provident Fund (GPF) stands at 7.1% per annum. 

This interest is calculated annually and added to the employee’s GPF account at the conclusion of each financial year. The GPF interest rate is one of the highest among fixed-income instruments, offering a higher return than fixed deposits, public provident funds, or national savings certificates. 

The GPF interest rate also affects the tax efficiency of the GPF investment, as the interest earned is exempt from tax up to a certain limit. 

GPF Contribution Amount

Subscribers have the flexibility to determine the amount of their GPF contribution. However, the minimum contribution to GPF mustn’t be less than 6% of the total salary.

On the other hand, the maximum contribution can be as high as 100% of the employee’s salary.
Advances from the General Provident Fund

In instances where an employee working in a government organisation seeks to borrow from the GPF fund, an interest rate of 2.5% above the prevailing GPF interest rate becomes applicable. The maximum limit for advances from the GPF is either three months’ salary or half the amount in the GPF account, whichever is lesser. Advances from the fund are permissible for the following reasons:

1. Treatment expenses for the illness and travel-related costs of the government servant’s family during the illness.
2. Pursuing higher education outside of India.
3. Higher education within India with a minimum duration of three years.
4. Expenses related to marriage, funerals, or other ceremonies.
5. Legal expenditures.
6. Acquisition of items such as TV, washing machine, cooking range, geyser, computer, etc.
7. Pilgrimage.

It’s important to note that these advances are subject to specific conditions and guidelines outlined in the GPF rules and regulations. Eligibility and the extent of the advance depend on the nature of the request and the individual’s circumstances.

GPF Withdrawal Rules in India

GPF Withdrawal Rules – Maturity and Process

Withdrawals from the General Provident Fund (GPF) become permissible under the following conditions:

1. Service Duration: After working for ten years, including any breaks in service, or before reaching the superannuation retirement age, whichever happens first, a subscriber is eligible.
2. Withdrawal Limit: General Provident Fund (GPF) participants have the option to withdraw an amount equivalent to twelve months’ pay or three-fourths of the credited amount, whichever is lower. In cases of illness, a withdrawal of up to 90% of the credited amount is permissible, subject to the terms outlined.
3. Extension of Limit: The limit can be extended to 90% of the GPF balance, provided the sanctioning authority approves, taking into consideration the subscriber’s status, needs, and GPF balance.
4. Permissible Grounds for Withdrawal:

Recent Allowances:

              a). Education: Encompassing primary, secondary, and higher education across various disciplines and institutions.

              b). Obligatory Expenses:

i) Betrothal, marriage, funerals, or other ceremonies related to oneself or family members and dependents.

ii) Addressing the health-related needs of oneself, family members, or dependents.

iii) Acquiring consumer durables for personal use.

Existing Allowances:

i) Housing: Enclosing the construction or acquisition of a suitable house or a pre-built flat for personal residence.

ii) Repayment of an existing housing loan.

iii) Acquisition of a house site for the purpose of building a residence.

iv) Construction of a house on a newly acquired site.

v) Reconstruction or addition to an already owned house.

vi) Renovation, additions, or alterations to an ancestral house.

Nomination for GPF

Government employees participating in the GPF can designate a nominee for their account. The nominee must be a family member if the employee has a family. In the case of minor nominees, they can only be nominated once they attain adulthood. If there are multiple nominees, the government employee must specify the share of each nominee.

How is GPF different from EPF?

1. Who Can Join:
   • GPF is for government employees.
   • EPF is for employees in big companies with more than 20 workers.
2. Interest Rates:
   • GPF interest rate is 7.1%.
   • EPF interest rate is 8.15%.
3. Contributions:
   • GPF contributors can give 6% to 100% of their basic pay.
   • EPF contributors must give 10% or 12% of their basic pay.
4. Tax Benefits:
   • Both GPF and EPF contributions get tax benefits under Section 80C.
5. Management:
   • GPF is managed by the Department of Pension and Pensioner’s Welfare.
   • The Employees’ Provident Fund Organisation manages EPF.

Remember, GPF is for government workers, while EPF is for those in big private companies. They have some differences, but both are great for saving for the future!

Difference between GPF, EPF, and PPF:

Criterion	GPF	EPF	PPF
Meaning	A savings-cum retirement scheme for government employees.	A savings-cum retirement scheme for employees in the organised sector.	A savings scheme for anyone willing to lock in their contributions for a long period.
Eligibility	Only government employees.	Employees in companies with more than 20 workers.	All resident Indians.
Interest Rate	7.1% per annum, revised quarterly by the government.	8.15% per annum, decided by the EPFO.	7.1% per annum, revised quarterly by the government.
Maturity Period	Age of retirement.	Age of 58 years.	15-year term.
Premature Closure	On leaving government service.	On 2 months of unemployment.	After 5 years on medical grounds and children’s higher education.
Tax Benefits	Exempt from income tax under Section 80C.	Exempt from income tax under Section 80C.	Exempt from income tax under Section 80C.
Management	Department of Pension and Pensioner’s Welfare.	Employees’ Provident Fund Organisation.	Post offices and banks.

FAQs| General Provident Fund

Source- https://7thpaycommissionnews.in/, economictimes.indiatimes.com

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