BAJAJ BROKING
March 04, 2025
8 mins read
The General Provident Fund (GPF) is a government scheme launched for state and central government employees. It aims to provide them with a regular source of income so that they do not need to compromise on their basic needs, including healthcare needs, food supplies, clothes, residence, etc. Therefore, government jobs have always been attractive to Indians.
Read on to learn the ins and outs of the GPF, including eligibility criteria, key features, benefits, current and historical trends, enrollment rules, withdrawal procedure, tax implications, etc.
Introduced in 1960, the General Provident Fund (GPF) is a personal provident fund designed exclusively for government employees in India. Every government employee can access this savings scheme to save money from their paycheck.
It enables an automated deduction of a fixed amount from their monthly salary and uses a compound interest rate method to grow their fund. Consequently, the employee receives the accumulated fund as a dependable source of retirement income from their employment period.
The GPF also offers a competitive interest rate, which is usually periodically revised by notifications released from the central or state government. Thus, it is considered a secure way to safeguard retirement. It also provides flexible monetary aid to combat unforeseen medical emergencies, wedding ceremonies, or education.
Additional Read : Retirement Planning Strategies
Now that you know what is GPF, let us take a look at the eligibility rules. According to GPF rules, the following three categories of government employees can avail of its benefits:
Any temporary government servant can apply if they continue their jobs for at least one year or more.
All permanent government servants.
All re-employed pensioners except those who are eligible for the contributory provident fund.
The Department of Pensions or Pensioners’ Welfare administers the GPF scheme, which is part of the Ministry of Personnel, Public Grievances, and Pensions. Check out the following key features of the GPF:
Any eligible government employee who subscribes to the GPF must pay a specific percentage of their monthly salary. They can usually open the account at the time of their joining.
This transaction is managed through the pensioners’ official portal, pensionersportal.gov.in.
According to the latest guidelines, the GPF deduction rate is 6%. The concerned authority can deduct 6% of the employee’s base salary to help them enjoy its benefits. A minimum of 500 Rs are deduced every month. However, this may vary according to the norms of the state and central governments.
Subscribers can increase the GPF deduction amount as per their choice.
The current interest rate of the GPF is 7.1%. It is subject to change based on the central or state government’s notifications.
The accumulated fund earns compounded interest.
If the employee faces a period of suspension from their duties, their GPF subscription will be stopped.
According to the pensioners portal, all retirement fund payments cease three months prior to the date of superannuation.
Upon the retirement of the subscriber, the immediate payment will be initiated.
The employee can apply for a loan against the GPF account if taking a loan is vital.
The prescribed form gives the subscriber the option of nominating a family member. Every subscriber must select a family member for nomination, which protects the subscriber's accumulated funds. If the subscriber experiences an unfortunate incident, one or more nominees may receive the account funds after completing essential paperwork.
To claim funds from the GPF, the subscriber must not submit any application.
If the employer transfers his job from one state to another state, they will be able to withdraw their fund immediately. Also, they can again open their GPF account in another state.
The GPF rule states that in the case of the subscriber’s demise, the nominee eligible to collect funds can claim an additional payment. This additional payment will equal the average account balance from the previous three years before death. However, certain requirements specified in the relevant rule may apply.
Under the GPF fund, the maximum additional payment that the nominee can claim is up to INR 60000. However, it is vital that the subscriber should be in the government service for at least five years. If not, the additional payment clause will not apply when claiming the fund.
Here are some benefits of contributing to GPF that you should know of:
Retirement Planning: The General Provident Fund investment is a method to provide government employees with financial stability post-retirement. It allows them to manage their medical or other day-to-day expenses through the accumulated funds without a regular source of income.
Return on Compounded Interest Rate: Consistent GPF contributions guarantee returns through a fixed interest rate that is compounded monthly. However, the government has the sole authority to revise and modify it periodically.
Tax Benefit: Another key advantage of using the General Provident Fund is that it allows for tax relief through tax deductions according to Section 80 C of the Income Tax Act. This way, GPF reduces tax liability.
Zero-Risk Investment Option: The government administers the GPF and manages it with a fixed interest rate, so it continues to be zero-risk. It is a safe and stable way to grow money.
Access to Loans: Employees can apply for the loan against the GPF. This way, they can easily claim their house construction expenses, education costs, and healthcare needs without withdrawing the funds.
Withdrawal Flexibility: In addition, employees have the option of completely or partially withdrawing the amount if urgent emergency needs occur. The best part is that no tax is levied at the time of withdrawal.
After-life protection: In the event of the employee’s demise, the accumulated fund, along with any additional payment (if applicable), will be credited to the nominee’s bank account.
No Upper GPF Deduction Limit: Unlike other investment options, which may have upper investment limits, GPF has no limit. Employees can credit their maximum salary to the account.
Check out the following GPF interest rate trends to know how the government updates it to help employees meet retirement goals in the scenario of high inflation:
Financial Year | GPF Interest Rate |
2007-2008 | 8% |
2008-2009 | 8% |
2009-2010 | 8% |
2010-2011 | 8% |
2011-2012 | 8% until November 2011, then increased to 8.6% from November 2011 to March 2012 |
2012-13 | 8.80% |
2014-15 | 8.70% |
2015-16 | 8.70% |
2016-17 | 8.1% until September 2016, followed by a slight dip to 8% from September 2016 to March 2017. |
2017-18 | 7.9% between April and June 2017. 7.8% from July to September 2017, maintaining the same rate until December 2017. 7.6% from January to March 2018, continuing through September 2018. |
2018-2019 | 7.6% from April 2018 to September 2018 8% from October 2018 to March 2019 |
2019-2020 | 8% from April 2019 to June 2019 7.9% from July 2019 to March 2020 |
2020-21 | 7.10% |
2021-22 | 7.10% |
2022-23 | 7.10% |
2023-24 | 7.10% |
2024-25 | 7.10% |
Enrolling in the GPF scheme is a fast and easy procedure. You should follow the following steps to ensure a smooth and seamless procedure:
Check the Eligibility:
First, you should check the eligibility criteria to determine whether you can subscribe to it.
Know the Concerned Authority:
You should know that if you are an employee of a state government, the Accountant General Office of your state will manage the registrations. On the other hand, if your job is in the central government sector, then the Central government personnel will manage it.
Fill out an Application Form:
Then, you should precisely complete an application form and submit it to the concerned authority.
Receive an Account Number:
In return, the accountant officer or the central government personnel will give you an account number.
Specify the Fixed Monthly Deduction:
Also, they specify how much portion of the employee’s salary should be deducted to make it to the DDO (Drawing and Disbursing Officer)
Get a Comprehensive Transaction Detail:
At the end of the fiscal year, you will receive a comprehensive document that covers your statement of credits, debits (if you have taken a loan), and earned interest.
The government employee can withdraw the accumulated GPF fund if he completes any of the obligations: If he has completed 10 years of service in the government job or his retirement tenure will fall within 10 years, whichever is earlier. This applies only if the employee remains employed in the government service after withdrawal.
Regardless of service tenure, if a government employee quits or transfers to another government job, he is entitled to withdraw the funds.
In the case of the beneficiary’s demise, the nominee can withdraw the money.
Any government employee can withdraw money deposited in the GPF fund at retirement or superannuation when the account matures.
Understanding how to avail of tax exemption can save you money and bring peace of mind. Hence, take a look at the following pointers:
If your GPF contribution exceeds 5 lakh rupees within a financial year, you are liable to pay the tax on the earned interest and also on the withdrawal amount from the GPF fund.
If your GPF contribution is below 5 lakh rupees within a financial year, you can avail of the tax exemption.
Government employees in India should consider the General Provident Fund (GPF) as their long-term investment choice because of its guaranteed returns and zero risk. It provides them with a regular source of income after retirement. However, they may withdraw their money to meet urgent necessities. For this, they need to enroll in the GPF account and deduct a specific portion of their salary. The best part is that they can avail of tax exemption.
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The full form of GPF is General Provident Fund. Simply put, it is a savings plan that has been designed for government employees in India. When an employee retires, the GPF can act as a source of income.
While they may seem similar, GPF, which stands for General Provident Fund, is primarily for government employees. On the other hand, PPF, stands for Public Provident Fund. This fund is available for the general public. Entrepreneurs, salaried or self-employed people can invest in PPF too.
For GPF, the contribution has to be a minimum of 6% of the employee’s salary. There is no upper limit on the contribution. You can make a 100% contribution as well.
Previously, the withdrawals and the maturity amount did not attract any tax. However, now, any interest on an employee's contribution exceeding ₹5 lakhs is subject to taxation. The contributions that you make towards your GPD can fetch you tax benefits under Section 80C of the Income Tax Act.
The full form of CPF is the Contributory Provident Fund. GPF stands for Government Provident Fund. Government employees now have the option of converting their CPF into GPF and avail themselves of a pension as per the Central Civil Service (Pension) Rules, 1972.
When a GPF account is opened, the individual needs to appoint a nominee. In case of the subscriber's death, the appointed nominee receives the GPF.
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