What Is General Provident Fund? Understanding Its Significance
Published On Dec 08, 2021
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In India, a classic and popular savings system is the Provident Fund. General Provident Fund (GPF), Public Provident Fund (PPF), and Employees Provident Fund (EPF) are the three forms of provident funds in India (EPF). The three forms of provident funds, however, have different characteristics, contributions, benefits, and rules and regulations.
For government employees, the General Provident Fund (GPF) is a smart way to save. Until the employee leaves the company, they can contribute a percentage of their pay on a regular basis. The employer transfers the whole accrued money in the GPF account to the employee upon retirement. To understand more about the general provident fund, read on.
What Is A General Provident Fund?
All government employees in India have access to a GPF account, which is a sort of PPF account. Additionally, government employees can pay a portion of their salaries to the General Provident Fund through this account. As a result, the employee receives the whole sum accrued over his or her employment period when he or she retires.
GPF interest rates are adjusted on a regular basis in accordance with government requirements. However, GPF's current interest rate is 7.1 percent (as of last updated on 30th April 2021).
Unless there is a case of suspension, an individual subscriber must contribute money to the General Provident Fund after they have applied. Furthermore, according to government regulations, three months before retirement, payments to the GPF account can be stopped.
Features Of General Provident Fund
Following are some of the features of general provident fund -
The GPF plan is administered by the Ministry of Personnel, Public Grievances, and Pensions' Department of Pension and Pensioner Welfare.
According to the Pensioners official webpage, government employees must begin contributing a percentage of their salaries to the GPF account in order to become members.
Unless the subscription is suspended, contributions to the GPF account must be made on a monthly basis. Subscriptions will also be halted three months prior to the date of retirement or superannuation.
When a subscriber retires, the final sum is paid immediately. Furthermore, no application form is required to receive the final payment from the General Provident Fund.
The subscriber must name a family member when they join the fund. As a result, in the case of the subscriber's death, the nominee is entitled to the fund's collected funds.
In the event of the respective individual’s death, the nominee is entitled to an extra payment under the GPF guidelines. As a result, the extra amount is equal to the average balance in the GPF account for the three years before the respective individual’s death. However, this is subject to a set of circumstances.
The sum due as a result of this rule should not exceed Rs. 60,000. Furthermore, the nominee is only eligible for this benefit if the subscriber has been employed for at least 5 years at the time of death.
Tax benefits on interest earned, donations, and returns are available to GPF investors under Section 80C of the Income Tax Act of 1961.
Eligibility Criteria For General Provident Fund
Following are the eligibility requirements for an individual under general provident fund -
- Individuals who are Indian residents and are government employees as well.
- Individuals must be government employees and must belong to a specified pay class in order to participate in the General Provident Fund.
- Individuals who are employees in the private sector are not eligible for the GPF.
- Individuals interested in becoming a member of the GPF, a government employee must donate a specified proportion of their income.
So, if an individual works for the government and wants to open a GPD Account, it's a terrific way to save for future financial objectives like a child's education, marriage, home, or even a medical emergency.
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.