What Is a General Provident Fund, and How Does It Work.
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General Provident Fund (GPF) is a provident fund (PF) account available only for government employees. In a provident fund account, the customer invests a part of his/her salary for a certain period of time and avails the amount on maturity. Interest rates on GPF are revised according to government's notifications issued from time to time. As per GPF rules, all temporary government servants after a continuous service of one year, all re-employed pensioners (other than those eligible for admission to the contributory provident fund) and all permanent government servants are eligible to subscribe to GPF.
10 Things To Know About General Provident Find
Here are 10 things to know about General Provident Fund (GPF):
- A government employee becomes a member of GPF by contributing a certain percentage of his/her salary to the account, according to pensioners' official portal -pensionersportal.gov.in
- At present, GPF fetches an interest rate of 8 per cent.
- A subscriber is required to subscribe monthly to GPF except during the period when he is under suspension.
- Subscriptions to the general provident fund are stopped three months prior to the date of superannuation, according to pensionersportal.gov.in.
- On retirement of a subscriber, instructions are issued for immediate payment of the final balance on retirement.
- A subscriber, at the time of joining the fund is required to make a nomination, in the prescribed form, conferring on one or more persons the right to receive the amount that may stand to his credit in the fund in the event of his death, before that amount has become payable or having become payable has not been paid.
- No application is required to be submitted by the subscriber for final payment from the fund.
- Under the GPF rules, on the death of a subscriber, the person entitled to receive the amount standing to the credit of the subscriber shall be paid an additional amount equal to the average balance in the account during the three years immediately preceding the death of the subscriber, subject to certain conditions provided in the relevant rule.
- The additional amount payable under that rule shall not exceed Rs 60,000. To get this benefit, the subscriber should have put in at least 5 years of service at the time of his/her death.
- According to Interim Budget 2019-20 proposals, people having taxable income of Rs 6.5 lakh per annum will be to avail "tax rebate" provided they invest Rs 1.5 lakh in specified investments such as PPF, General Provident Fund (GPF) and insurances. The proposed rebate on tax liability will be applicable from April 1, 2019.
Eligibility for GPF
Any individual who fulfils the following criteria are eligible to open a GPF account-
- A resident Indian who is a government employee
- The General Provident Fund is necessary for government employees to belong to a specific salary class.
- Any employee belonging to the private sector is not eligible for GPF
It is essential for the government employee to contribute a certain percentage of their salary to become a member of the GPF
How To Open A GPF Account?
One can open a GPF account very quickly. Moreover, the GPF account is maintained by the AG office (Accountant General) of the respective States: and Central in the case of Central government employees. Subsequently, one has to fill an appropriate form and submit it to the Account General of respective states. They will, in turn, assign an account number. Also, they prescribe a monthly deduction to be made from employees’ salary to DDO (Drawing and Disbursing Officer) of that Establishment. Furthermore, at the end of the financial year, a statement of credits and debits (on account of the loan) and closing balance, including interest accrued, is dispatched to the employee.
Conclusion
Therefore, GPF is a mandatory savings scheme launched for government employees only. It also helps fulfil financial goals like children’s education, marriage, or medical emergencies. Being a government employee, GPF helps them save a substantial amount for their golden years.
Also read- What Is Investing And What Does It Mean? Learn About Several Investment Options.
