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What Is A General Provident Fund, And How Does It Work

Updated On Mar 23, 2022

GPF or General Provident Fund is a type of PPF account for all government employees in India. Also, this account allows the government employees to contribute a certain percentage of their salary to the General Provident Fund. Hence, the total amount accumulated during the employment term is paid at retirement to the employee. 

The rate of interest of GPF is revised periodically as per the government regulations. However, the current rate of interest of GPF is 7.1% (as of last updated on 30th April 2021). 

Once an individual subscriber applies for the General Provident Fund, they need to contribute money unless there is a case of suspension. Moreover, as per the government rules, one can stop the payment to the GPF account three months before the date of retirement. 

What Is A General Provident Fund, And How Does It Work

GPF Interest Rate 2021

The government revises the GPF interest rate every quarter. For the current quarter (October – December 2021), the GPF interest rate is 7.1%. It has been issued in the notification given by The Budget Division of the Department of Economic Affairs at the Ministry of Finance. The historical interest rates for General Provident Fund are as follows:

The interest rate of 7.1% will be applicable to the below-mentioned funds:

  • The General Provident Fund (Central Services)
  • The Contributory Provident Fund (India)
  • The All India Services Provident Fund
  • The State Railway Provident Fund
  • The General Provident Fund (Defence Services)
  • The Indian Ordnance Department Provident Fund
  • The Indian Ordnance Factories Workmen’s Provident Fund
  • The Indian Naval Dockyard Workmen’s Provident Fund
  • The Defence Services Officers Provident Fund
  • The Armed Forces Personnel Provident Fund

Features of GPF General Provident Fund

The following are the main features of the GPF scheme 


The GPF scheme is managed by the Department of Pension and Pensioner’s Welfare under the Ministry of Personnel, Public Grievances, and Pensions.


As per the Pensioners official portal, to become a member of GPF, the government employees must start contributing a certain portion of their salary to the GPF account. 


One must contribute towards the GPF account monthly except during the period where the subscriber is under suspension. Furthermore, the subscriptions will be stopped 3 months before the date of retirement/superannuation.


Once the subscriber retires, immediate payment of the final balance is made. Moreover, one need not submit an application form to get the final payment from the General Provident Fund. 


At the time of joining the fund, the subscriber needs to nominate a family member. Thus, the nominee gets the right to receive the accumulated amount from the fund in the event of the subscriber’s demise. 

Death Benefit

As per the GPF rules, the nominee is paid an additional amount in case of the death of the subscriber. Thus, the additional amount is equal to the average balance in the GPF account for 3 years immediately preceding the death of the subscriber. However, this is subject to certain terms and conditions. 

The additional amount that is payable under this rule should not exceed Rs. 60,000. Furthermore, the nominee can avail of this benefit only when the subscriber is in service for at least 5 years at the time of his/her death. 

Tax Benefit

Investing in GPF one can avail tax benefits on interest earned, contributions and the returns under Section 80C of the Income Tax Act, 1961. 

Eligibility for GPF

Any individual who fulfils the following criteria are eligible to open a GPF account- 

  • A resident Indian who is a government employee
  • The General Provident Fund is necessary for government employees to belong to a specific salary class.
  • Any employee belonging to the private sector is not eligible for GPF
  • It is essential for the government employee to contribute a certain percentage of their salary to become a member of the GPF

How To Open A GPF Account?

One can open a GPF account very quickly. Moreover, the GPF account is maintained by the AG office (Accountant General) of the respective States: and Central in the case of Central government employees. Subsequently, one has to fill an appropriate form and submit it to the Account General of respective states. They will, in turn, assign an account number. Also, they prescribe a monthly deduction to be made from employees’ salary to DDO (Drawing and Disbursing Officer) of that Establishment. Furthermore, at the end of the financial year, a statement of credits and debits (on account of the loan) and closing balance, including interest accrued, is dispatched to the employee.


Therefore, GPF is a mandatory savings scheme launched for government employees only. It also helps fulfil financial goals like children’s education, marriage, or medical emergencies. Being a government employee, GPF helps them save a substantial amount for their golden years. 

Also read- How To Get Loan Against Life Insurance Policy?

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Disclaimer: This article is issued in the general public interest and meant for general information purposes only. Readers are advised not to rely on the contents of the article as conclusive in nature and should research further or consult an expert in this regard.

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