General Provident Fund: Meaning, Eligibility Criteria, & Features

Provident Fund is a conventional savings scheme that is quite popular among Indians to save their hard-earned money. Three kinds of Provident Fund are available in India - Public Provident Fund, General Provident Fund and Employee Provident Fund. This blog focuses on the crucial aspects of the General Provident Fund and its difference from the other two. So, if you are keen to know about them, keep reading!

Team Digit

What Is a General Provident Fund?

General Provident Fund is a type of Public Provident Fund account that is compulsory for every government employee working in India. Every government employee can deposit a particular percentage of their salary to this GPF account. The accumulated corpus will then be paid to the concerned account holder during his or her retirement.

[Source]

Who Is Eligible to Open a GPF Account?

You can open a GPF account only when you meet the following eligibility criteria:

Must be an Indian resident
Must be a government employee belonging to a particular salary group
Should not be an employee working in a private sector organisation
All Temporary Government servants after a continuous service of one year
All Permanent Government servants
All re-employed pensioners (other than those eligible for admission to the Contributory Provident Fund )

[Source]

What Are the Key Features of the General Provident Fund?

Take a look at the features of a General Provident Fund:

Management of the Scheme: The Department of Pension and Pensioner's Welfare under the Ministry of Personnel, Public Grievances, and Pensions manage the General Provident Fund scheme.
Membership in the GPF: If you are a government employee and wish to become a member of GPF, then you must contribute a specific percentage of your salary to the GPF account.
Contribution to a GPF Account: You must contribute a specific portion of your salary to the GPF account monthly. However, there is an exception to this only when the subscription is suspended. Moreover, the subscription will be closed 3 months before your retirement date.
Final Payment from the Account: Once you retire from your service, the final accumulated balance is paid to you. Moreover, there is no additional requirement to submit an application form to obtain the final payment from your GPF account.
Nomination of a Family Member: When opening a GPF account, you need to nominate one of your family members. This nominee holds the right to get the payment from your GPF account in the event of your demise.
Death Benefit: According to the rules of the General Provident Fund, your appointed nominee will get an additional amount in the event of your death. This additional amount is equivalent to the average amount in the GPF account for 3 years following your death. Note this provision is subject to specific terms and conditions. Apart from these, remember that this extra amount should not be above ₹ 60,000. Furthermore, your appointed nominee can enjoy this benefit when you are employed in service for at least 5 years before your death.
Tax Benefits: According to Section 80C of the Income Tax Act, enjoy tax benefits on the contributions made towards your GPF account, interest and returns earned from the same.
Ceiling on GPF: There is a ceiling of Rs. 5 Lakh on subscription to the General Provident Fund (GPF) in a financial year.

[Source]

How to Open a General Provident Fund Account?

You can open a GPF account by filling in an appropriate application form. Submit this duly signed form to the Account General of your state. In exchange, you will receive an account number from them. They also mention the monthly deduction from your salary to be made to the Drawing and Disbursing Officer of that office. At the end of a financial year, you will receive the credit and debit statements, interest earned and closing amount.

[Source]

What Is the Contribution Amount to a GPF Account?

You can set the contribution percentage to be paid to your GPF account. The minimum contribution to the GPF account should not be below 6% of your total salary. The maximum contribution rate that you can set is 100% of your salary. However, there is a ceiling of Rs. 5 Lakh on subscription to the General Provident Fund (GPF) in a financial year.

[Source]

What Is a GPF Advance?

A GPF advance implies an interest-free credit from your savings accumulated in your GPF account for a specified cause. Here are some of the pointers associated with it that you must learn about before borrowing the same:

You can take GPF advances based on a specified reason. This includes medical contingencies, education, buying a house, marriage, or purchasing consumer durables.
As a GPF subscriber, you qualify to withdraw three-fourths of the balance or 12 months of the contributed amount to your GPF account, whichever is less. However, the sanctioning officer may allow you to withdraw 90% of the GPF balance under special situations.
The sanctioning authority must approve and credit the amount within 15 days of raising a request for GPF advance. You do not need to submit any documents for taking GPF advances.
You must repay the borrowed amount in instalments within a maximum period of 60 months.
There are no interest rates on these advances.
You can raise a claim for GPF advances without limits throughout your career. If you are repaying an existing GPF advance, you can raise a claim for a new one. However, if you get the advance before the repayment of your existing credit, the outstanding dues will be incorporated into the new one. Instalments for these two consolidated advances will be revised and paid accordingly.

[Source]

What is the Maturity Period and Rules for Withdrawal Process of GPF?

Besides, you can withdraw a particular amount from your GPF account for multiple purposes. However, the withdrawal limits and eligibility parameters differ with each withdrawal purpose.

So, for your convenience, listed below are a few rules for withdrawal from a general provident fund account:

1. For Medical Expenses, Consumer Durables, Diseases and Education

Withdrawal Limit: The maximum withdrawal limit is 50% of the half-year salary or 6 months pay along with DP, whichever is lower.
Eligibility Criteria: Completing 20 years of service (including broken periods) and 10 years before retiring from a government service, whichever is earlier.

2. For House Construction or Reconstruction and Ancestral Home Renovation

Withdrawal Limit: The maximum withdrawal limit is 3/4^th of the balance or actual cost whichever is less.
Eligibility Criteria: Completing 15 years of service (including broken periods) and within 10 years of retiring from a government service, whichever is earlier.

3. For House Acquisition

Withdrawal Limit: 1/4^th of the balance or actual cost whichever is less.
Eligibility Criteria: Completing 15 years of service (including broken periods) and within 10 years of retiring from a government service, whichever is earlier.

4. For Expenditure towards construction of a house on a site purchased from the amount withdrawn under Rule 15-F

Withdrawal Limit: The maximum withdrawal limit is 1/3^rd of the balance or actual cost whichever is less.
Eligibility Criteria: Completing 15 years of service (including broken periods) and within 10 years of retiring from a government service, whichever is earlier.

5. For Extensive Repairing of a Car

Withdrawal Limit: The maximum withdrawal limit is ₹ 12,000 or 1/4^th of the credit amount, or actual price whichever is lower.
Eligibility Criteria: 3 years before retiring from a government service or after completing 28 years of service.

6. Expenditure towards higher education including travelling expenditure of self, child. Education includes outside India.

Withdrawal Limit: 3 months pay or half of GPF balance whichever is less. In special cases up to 10 months of pay.
Eligibility Criteria: On completion of 20 years of service or 10 years service before retirement.

[Source 1]

[Source 2]

[Source 3]

What Are the Differences Between EPF, GPF and PPF?

The differences between GPF, EPF and PPF are represented in a tabular format below:

Parameters	General Provident Fund	Public Provident Fund	Employees Provident Fund
Eligibility criteria	Only for government employees	For every Indian resident	For employees working in an organised sector
Contribution limit	Minimum contribution - 6% of total salary Maximum contribution – 100% of the total salary	Minimum contribution – Yearly payment of ₹ 500 Maximum contribution – Yearly payment of ₹ 1.5 lakh	Minimum contribution – 12% of your salary
Rate of interest	7.1%	7.1%	8.15%
Maturity period	Till the time of retirement	15 years	Till the completion of 58 years
Loan facility	Can obtain a loan anytime within your service period	You can avail a loan only on the 6th and 3rd fiscal year from the date of opening an account	You can withdraw partially and cannot avail any loan against EPF
Premature closure of an account	Upon suspension or leaving government service	After completing 5 years of opening an account. Besides, being an account holder, you can close your PPF account if your parents, dependent children, or spouse suffers a severe illness. Moreover, you can also close your PPF account to use funds to finance higher studies.	Within 2 months of unemployment

To conclude, the General Provident Fund is a compulsory savings scheme for every government employee. This scheme will help you achieve financial independence during your retirement by providing assured returns and other benefits against the contribution made towards your GPF account.

Frequently Asked Questions

All

Who determines the interest rate for the General Provident Fund?

The Indian government determines the interest rate for the General Provident Fund every year.

Can you withdraw funds from your GPF account to purchase land or a house and repay an outstanding loan?

Yes. You can withdraw upto half of balance or 6 months pay whichever is less. In special cases upto 3/4^thof balance to buy a house or land or repay an outstanding loan.

[Source]

General Provident Fund: Meaning, Eligibility Criteria, & Features

What Is a General Provident Fund?

Who Is Eligible to Open a GPF Account?

What Are the Key Features of the General Provident Fund?

How to Open a General Provident Fund Account?

What Is the Contribution Amount to a GPF Account?

What Is a GPF Advance?

What is the Maturity Period and Rules for Withdrawal Process of GPF?

1. For Medical Expenses, Consumer Durables, Diseases and Education

2. For House Construction or Reconstruction and Ancestral Home Renovation

3. For House Acquisition

4. For Expenditure towards construction of a house on a site purchased from the amount withdrawn under Rule 15-F

5. For Extensive Repairing of a Car

6. Expenditure towards higher education including travelling expenditure of self, child. Education includes outside India.

What Are the Differences Between EPF, GPF and PPF?

Frequently Asked Questions

Who determines the interest rate for the General Provident Fund?

Can you withdraw funds from your GPF account to purchase land or a house and repay an outstanding loan?

Latest News