GPF stands for General Provident Fund. People working as permanent employees in Private and Government companies will get to know about Provident Fund. But there are many types of Provident Funds. Now we are going to learn about General provident Fund which is given to employees who work in Government sectors in India. It is a retirement savings scheme for employees who work in government sectors in India. GPF is a defined contribution scheme. In GPF both the employee and the employer (the company in which the employee is working) contribute to the fund during the employee’s working years. When the employee retired or resigned from his job then he can claim the Provident Fund amount. The GPF offers attractive interest rates and the employees can withdraw the amount partially and can apply for loans.
History of GPF
The General Provident Fund (GPF) was first introduced in India in 1881 at the time of British rule to provide a retirement benefit to government employees. The scheme was initially introduced only for employees who work as military personnel, but it was later extended to all government employees. But in 1985, GPF was merged with an already presenting act named Contributory Provident Fund and named together as General Provident Fund. Since then in GPF both the employee and employer made contributions to the fund. In the new GPF, all government employees, irrespective of their date of joining, were brought under a uniform scheme.
Need of GPF
- Retirement Planning: GPF helps employees by creating a corpus by the time of their retirement which they can use after their retirement.
- Forced Savings: GPF is deducted from an employee’s salary every month, which ensures that they save a certain amount of money every month which is a good saving habit.
- Tax Benefits: Under Section 80C of the Income Tax Act, GPF contributions are eligible for tax benefits which can help employees save on taxes.
- Safe Investment: GPF is a safe investment option as it is regulated by the government. The interest rate on GPF is fixed by the government and is usually higher than the interest rates offered by banks which is a very safe investment.
- Emergency Funds: GPF can also serve as an emergency fund because in case of any sudden circumstances or for education or housing, employees can also withdraw a portion of their GPF balance for specific purposes.
Features of GPF
- Contributions: Both the employee and the employer will make monthly contributions to the GPF. The employee’s contribution is usually 10% of their basic salary and other allowances, while the employer also contributes an equal amount as that of the employee.
- Nomination: Employees should select a nominee who will receive their GPF amount after them.
Advantages of GPF
- Regular Savings: Government employees through GPF can save their monthly salary regularly which helps them easy to achieve their financial goals.
- Safe Investment: GPF is regulated by Government so it is a safe investment option. The interest rates on GPF are fixed by the government and are usually higher than the interest rates offered by banks.
- Tax Benefits: The employees who are having their salaries deducted from GPF can enjoy tax benefits under section 80 C.
- Pension: The GPF scheme helps government employees create a corpus that they can use after retirement.
- Loans and Withdrawals: With the option of GPF part final withdrawal, employees can withdraw their fund amount partially for specific reasons like education, and medication which need not be repaid back. And they can also avail of loans based on their GPF fund.
- Portable: The GPF account can be transferred from one employer to another if the employee moves from one government job to another. It gets continued on the same UAN number. (Universal Account Number).
Conclusion
Finally, in conclusion, we can say that GPF is a good saving instrument for government employees. The employee can contribute a portion of his salary regularly till his working period gets completed. On retirement, the employer transfers the total accumulated amount in the GPF account to the employee which is a very safe investment. And partial withdrawals can also be done from the GPF account which is very beneficial.
FAQs
Q1. What is GPF?
Ans. GPF is a retirement savings scheme for employees who work in government sectors in India. GPF is a defined contribution scheme. In GPF both the employee and the employer (the company in which the employee is working) contribute to the fund during the employee’s working years.
Q2. What are the advantages of GPF?
Ans. The advantages of the GPF scheme are Regular savings, Safe Investment, Tax Benefits, and Pension.
Q3. Who is Eligible for the GPF Scheme?
Ans. Any Government employee who is a resident of India having work experience of more than or equal to one year can apply for GPF and be eligible for it.
Q4. What is the GPF Part final Withdrawal?
Ans. With the option of GPF part final withdrawal, employees can withdraw their fund amount partially for specific reasons like education, and medication which need not be repaid back.
Q5. How the rate of Interest for GPF is fixed?
Ans. The rate of Interest for the General Provident Fund is fixed every year by the Government which will be usually higher than the interest rates provided by the Banks. The present rate of interest is 7.1 %.