BAJAJ BROKING
March 03, 2025
5 mins read
An integral part of planning the post-retirement life is building a significant corpus to live a peaceful and economically sorted life. You must have heard about several retirement plans that promise an impressive return post-retirement. Today, we will talk about the General Provident Fund or the GPF, which is specifically designed to help you build a sizable corpus.
Before moving ahead, remember that the government endorses three instruments that allow you to save for a post-retirement life: the Public Provident Fund, the Employees Provident Fund, and the General Provident Fund. The rules of all these funds are different, and therefore, you need to understand them before investing. So, let’s get into the details of GPF rules.
Let’s start with the question, “What is GPF”? The full form of GPF is General Provident Fund. General Provident Fund is a specifically designed retirement plan that allows you to build a sizeable corpus to create a safety net for your post-retirement life. Just like any other provident fund, under the General Provident Fund, you periodically deposit a specific amount of money in the fund. The accumulated amount, along with accrued interest, is deposited in your account either on the date of retirement or superannuation.
Remember that you are allowed to make partial withdrawals before retirement. However, you need to keep in mind that there are certain conditions for such withdrawals.
If you are planning to subscribe to the General Provident Fund then it is important for you first to understand and analyse the rules to ensure that the fund will meet your requirements.
Since the General Provident Fund is endorsed by the government, the rules are also issued by the government of India. Keep reading to learn about the eligibility criteria, nomination rules, deposit rules, interest rate, withdrawal rules, etc, that you have to follow to invest in GPF.
Before we get into the details of the eligibility rules for investing in a General Provident Fund, you must first know that the GPF is available only to government employees.
There are different classifications of employees who can invest in GPF, which include:
Any government employee can subscribe to GPF. Provided that the employee is a resident Indian.
Any temporary government employee who has an employment record of one year or more can subscribe to GPF.
Any individual employed to work in the organisational functions under the EPF Act, 1952 can subscribe to the GPF.
Any retired government employee who is a pensioner and has been re-employed can subscribe to GPF. Provided that that employee is not eligible for contributory provident fund.
Note: Keep in mind that GPS is not open for private sector employees.
Just like any other provident fund, the General Provident Fund also has certain specific deposit rules like the minimum and maximum deposit amount, frequency and maturity date.
Below is a table for you to take a quick look at before subscribing to GPF:
Minimum Amount | The minimum amount shall not be less than at least 6% of the employee’s total income. |
Maximum Amount | The maximum amount cannot exceed the employee’s total income. |
Frequency | As a general rule, employees have to make a monthly deposit in the GPF. However, if the subscriber is suspended from their employment, then the rule for monthly deposit is waived. |
Maturity Date | The General Provident Fund matures at the date of the employee's retirement or superannuation. |
The general provident fund allows you to appoint a nominee as well. Here are the rules you need to know:
You can only appoint a family member as a nominee.
You are allowed to appoint more than one nominee. In such a case you need to specify the share of each nominee.
A minor can also be appointed as a nominee provided that there is a guardian to hold the nomination until the minor turns major i.ez. the age of 18 years.
To begin with, you must first know that you can withdraw funds from the GPF at the time of its maturity, which is the date of retirement or superannuation. However, under specific withdrawal rules, a partial withdrawal before maturity is allowed.
Here’s everything you need to know about GPF withdrawal rules:
You must have completed at least 10 years of employment.
You can make withdrawals up to 90% of the total outstanding balance in case of your or your dependent family member's illness.
You can make withdrawals of up to 90% of the total outstanding balance in the fund for purchasing a house, repaying a home loan, buying land, reconstructing your existing home, etc.
You can make withdrawals up to 90% of the total outstanding balance without any of the above reasons, provided that the withdrawal is being made 2 years before your retirement.
You can make withdrawals of up to 75% of the total outstanding balance provided that withdrawal is being made to fund education, marriage, or any other need of your or your dependent family members.
The nominee you appoint can also withdraw in case of your death. The nominee is also entitled to get an additional amount which is equal to the average of three years of the PF balance preceding the date. However, in any case such an additional amount cannot exceed ₹60,000.
As it is for any other provident fund, the GPF also promises interest rates throughout. These rates are revised and issued by the central government.
For the present quarter, the GPS interest rate has been set at 7.1%.
One of the most appealing features of the general provident fund is that it provides impressive tax benefits.
The contributions you make towards GPF and interest that you earn from such contributions in addition to the returns received at the time of maturity, are exempted from tax liabilities under section 80 C of the Income Tax Act, 1961.
Financial planning for retirement is crucial, especially in this economy. The General Provident Fund allows you to create a financial safety net for the future when your regular source of income stops. Now that you have understood all the necessary rules regarding the GPF, you are ready to make an informed decision.
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Disclaimer: Investments in the securities market are subject to market risk, read all related documents carefully before investing.
This content is for educational purposes only. Securities quoted are exemplary and not recommendatory.
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The general provident fund is a specifically designed retirement plan for government employees. Under the plan, government employees make a monthly deposit of a fixed sum from their income that helps them build a sizeable corpus for retirement.
Government employees can subscribe to the General Provident Fund. Remember that this type of provident fund is not open for private employers to subscribe to.
The Central Government decides the interest rates under the General Provident Fund. For the present year, the interest rates are fixed at 7.1%.
You can withdraw funds from the GPF at the time of maturity that is, the date of your retirement or superannuation. However, partial withdrawals are allowed after completion of at least 10 years of employment under specific withdrawal rules.
Yes, the contributions you make towards GPF, the returns and interest on such contributions are exempt from tax liability under section 80 C of the Income Tax Act, 1961.
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