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General Provident Fund (GPF) Fund for Government Employees

In India, a classic and one of the most preferred savings systems is the Provident Fund. These Provident Funds can be divided into three types-

All three may be provident funds, but still, they differ on the basis of the features, the contribution amount, the eligibility, applicable rules and regulations, etc.

In the article given below, the General Provident Fund or GPF has been discussed in detail, including its meaning, characteristics, account-establishing process, eligibility, General Provident Fund rules and regulation, withdrawal method, nomination, etc.

What Do You Mean by General Provident Fund?

GPF, or General Provident Fund, is one of the three types of Public Provident fund accounts available only to employees working for the Indian government. Primarily, it permits all government employees to contribute a portion of their pay to the General Provident Fund.

The total money the employee contributes during the period of employment is returned to them when they retire.

Eligibility Criteria

For opening a GPF account, certain conditions are required to be complied with. Anyone who meets the following conditions can open a GPF account:

  1. All temporary government employees after one year of continuous employment.
  2. All permanent government employees.
  3. All Retired government employees who were reemployed
  4. All government employees who work in establishments are covered by the EPF Act of 1952.

Features of General Provident Fund

Membership

One can be a scheme member by investing a certain part of the salary in the GPF Account. This must be done in accordance with the pensioner's official portal.

Administration of the Scheme

The scheme is administered or looked after by the Department of Pension and pensioners' welfare. This is done under the Ministry of Personnel, Public Grievances and Pensions.

Nomination

The subscriber must nominate a family member when they join the fund. As a result, if the subscriber dies, the nominee is entitled to the fund's cumulative balance.

Contribution

Except when the subscription is suspended, contributions to the GPF account must be made monthly. This monthly contribution or subscription will not be taken from three months before the employee's retirement or the superannuation date.

Payment

Upon the person's retirement, the final balance from the account is paid to the person immediately. However, no form is required to obtain this amount from the account.

Death Insurance

In the event of the subscriber's death, an extra sum is paid to the nominee in accordance with the guidelines of the GPF. This extra sum is equivalent to the average balance held in the account for the three years preceding the subscriber's death.

However, certain terms and conditions may be applied to the same. This extra sum paid cannot be more than INR 60,000. However, this amount will only be paid to the nominee if the person had been in service for at least the last 5 years when they died.

Benefit in Tax

By investing in a GPF, you can get tax benefits on interest, donations, and returns. This tax deduction will be allowed as per the rules of the Income Tax Act 1961 as per Section 80C.

General Provident Fund Interest Rate 

The Central Government determines this. It was set at 7.1% for the fiscal year 2021-22.

If a government employee borrows money from the fund, they will be charged an interest rate that is 2.5% more than the GPF interest rate.

How Can I Set up a GPF Account?

It is very easy to open an account under GPF. This account is managed by the different Accountant General, i.e. AG Office of each state for state employees. If the employee is of the Central Government, then it is managed by the Central Accountant General.

For opening the account, a form must be filled out and submitted to the AG of the state where it is to be opened. Upon submitting the form, an account number will be given to you, and a monthly amount will be deducted from your salary will be specified. This will be made by the Drawing and Disbursing Officer or the DDO.

The employee who opened the account will receive a statement at the end of the year. This statement will have information about all the contributions made and any loan obtained, i.e. all the debits and credits will be reflected along with the accrued interest, if any.

Rules and Regulations Followed by the Subscriber

To open and maintain a GPF account, one has to follow some rules and regulations. These are as follows :

  • The subscriber cannot contribute more than the income received in the GPF account.
  • One can have more than one nominee for the GPF account, but they should mention the share of each nominee.
  • The GPF account matures at the subscriber's retirement, but the subscriber can stop their contribution before three months of retirement.
  • Before retirement, subscribers can withdraw money if they have completed at least ten years of service.
  • If an individual wants funds for the education of children or some ceremony, they can withdraw 75% of the outstanding balance or subscription of twelve months, whichever is lower.
  • 90% of the amount can be withdrawn before two years of retirement.
  • Interest income on GPF amount is exempt from income tax.
  • If the subscriber dies, the nominee will get an amount equal to the average of three years of GPF, but it can not be greater than 60000.
  • In case of a medical illness of own or dependent, one can withdraw 90 % of the outstanding amount within seven days.

Subscription Rates

The persons paying the amount or subscribers can decide the amount on their own. However, there are certain conditions for the same, which have been given below:

  1. a) The amount shall be given in the whole INR.
  2. b) The amount can be any amount that should not be below 6% of the total salary and not more than the total salary.

If the person had previously contributed at a greater rate of 8.33%, then the above amount will not be below 8.33% of the total salary and not more than the total salary.

c) If the rate subscribed is the minimum rate, if any rupee is in fraction, then it will be rounded to the next whole number, i.e. the higher whole number or rupee.

Change in the Amount of Subscription

The change in the amount of subscription fixed can be undertaken as follows:

  • The amount can be reduced once a year at any time during the year.
  • The amount can be increased twice during the year.

The amount can be reduced or increased as given above. In case of a reduction of the amount, the amount cannot go below the minimum amount specified above.

Suppose a person takes a leave without getting the salary or half salary for a particular month or leaves on half salary and chooses not to contribute during such period. In that case, the amount payable will become proportionate to the days spent on the job, including leave, if any, other than the leave mentioned above.

Advances from GPF 

A person can take an advance or a loan from the scheme for a maximum of 3 months' salary or 50% of the balance in the account, whichever is less among the two. Fund advances will be permitted on the following conditions:

  • Treatment for illness and travel expenses incurred by the government employee's family while ill.
  • Higher education outside of India.
  • A minimum of three years of higher education in India.
  • Ceremonies such as weddings, funerals, etc.
  • Legal costs.
  • Purchase of a television, a washing machine, a kitchen range, a geyser, a computer, and so on.
  • Pilgrimage.

Advance is granted by sanctioning authority within fifteen days of the letter of request. To claim the advance, the subscriber need not furnish any documentary evidence. The borrower must repay the borrowed amount within sixty months of installments.

GPF account is interest-free. Moreover, one can apply for multiple advances. One can apply for a fresh advance even if one is paying for an existing advance.

The only condition is that if the new advance is granted before the repayment of the existing advance, the outstanding amount will be added to the new advance, and the installments will be refixed according to the consolidated amount.

General Provident Fund Rules for Withdrawal

It is possible for the persons to withdraw the amount from their GPF account for various reasons. Each withdrawal has its own set of limits and qualifying conditions. The given below are some of the reasons for which funds can be withdrawn from the account. Their limit and eligibility have also been mentioned below. These are-

  1. Automobile Overhaul/Extensive Repairs

The limit of withdrawal and eligibility are as follows-

  1. a) Limit: One-third of the credit balance or INR 10,000, whichever is less.
  2. b) Eligibility: You may withdraw after 26 years of service or three years before retirement.
  3. Purchase of Durable Goods, Medical Bills, or for Education or Treatment of Any Disease or Illness

The limit of withdrawal and eligibility are as follows-

  1. a) Limit: A maximum of 50% of the balance outstanding or a half-year salary, whichever is less.
  2. b) Eligibility: The amount can be withdrawn if the service period completed is 15 years, including break periods or 10 years before retirement, whichever comes first.
  3. Buying/Constructing a Home or Making Any Modifications to the Home or Buying Land, Repayment of a Mortgage, or Refurbishment of a Home of Ancestors

The limit of withdrawal and eligibility are as follows-

  1. a) Limit: The maximum limit is 90% of the unpaid balance.
  2. b) Eligibility: Withdrawal is permitted at any moment throughout the service.
  3. Subscription to Group Insurance Scheme

The limit of withdrawal and eligibility are as follows-

  1. a) Limit: One year's subscription price to the Group Insurance Scheme.
  2. b) Eligibility: Can leave at any moment throughout the service.
  3. Buying a Vehicle or Repaying the Loan Taken for Buying Such a Vehicle

The limit of withdrawal and eligibility are as follows-

  1. a) Limit: The maximum amount that can be withdrawn is 50% of the balance outstanding or INR 22,000 for a 4-wheeler or INR 4000 for a 2-wheeler.
  2. b) Eligibility: Upon completion of service of 15 years or within 5 years from retirement, you may withdraw.
  3. Expenses Incurred for Conversion of the Leased Property to a Freehold Property

The limit of withdrawal and eligibility are as follows-

  1. a) Limit: The maximum limit is 90% of the balance outstanding.
  2. b) Eligibility: All authorities can withdraw the funds at any moment.
  3. Rule 15 (1) (Q)- Without Providing Any Justification Before 2 Years from Retirement

The limit of withdrawal and eligibility are as follows-

  1. a) Limit: The maximum limit is 90% of the balance outstanding.
  2. b) Eligibility: Persons who will retire next year.
  3. GPF Upon Leaving the Government Service

When subscribers leave government service, they can withdraw their whole GPF amount.

  1. Retirement GPF Withdrawal

When the subscriber retires, they can withdraw the entire balance in their GPF.

  1. GPF Withdrawal Upon the Subscriber's Death

When a nominee is nominated for GPF, the entire amount is paid to the nominee. If an individual doesn't make a nomination, then their family will be paid the amount in equal shares.

However, the following family members will be denied a share:

  • Sons who are adults
  • Grandsons who are adults
  • Married daughters with living husbands
  • Daughters of a deceased son whose husbands are still living

The subscriber must only utilize the withdrawal for the indicated purpose and not for any other purpose. The subscriber can convert an advance into a withdrawal by making a written request to the relevant accounts officer.

Nomination for the GPF

The person who has become a scheme member can choose a nominee for the same. Only a member of the person's family can be chosen as the nominee.

If a person is a minor, they can be selected only upon becoming an adult. In case there are multiple nominees, then a percentage needs to be specified for each such nominee.

Procedure to Check GPF Balance Online

There are several separate websites in each state for GPF balance checking. However, the following general procedure is performed-

  1. The first step is to log in to the website of GPF.
  2. On the website, different information, such as GPF number, series code, employee pin, etc., would have to be provided. The local Accountant General provides this information through the treasury or DDO.
  3. Finally, enter the Captcha code and click on submit.
  4. The balance will be displayed on the screen.

Conclusion

GPF is a mandated savings plan designed solely for employees working for the government. It also aids in achieving financial objectives such as saving for the future, marriage, education of the children, and any medical treatment or health issues.

Frequently Asked Questions (FAQs):

How much does the GPF contribution cost?

A GPF account holder contributes 6% of their pay in regular installments for a certain period. In addition, the government contributes 6% of the employee's salary to the account.

Is the GPF money taxed?

Any interest earned on contributions made during the fiscal year 2021-22 in excess of INR 5 lakhs will be taxable in the hands of the employee or individual contributing to those funds as Income from Other Sources.

Is GPF compulsory?

Government employees of a specified salary level are required to contribute to the General Provident Fund. The General Provident Fund is not available to employees of private sector companies. To become a member of the General Provident Fund, a government employee needs to contribute a specific percentage of their salary.

What is the procedure for checking the GPF Balance online?

Different states have different websites for GPF. However, one can check the balance online by visiting the website, filling in the necessary details such as GPF number, series code, date of birth, and captcha code, and submitting it.

What can a person do to get the GPF Account Password?

To obtain the password of the GPF Account, visit the official website, click on the registered user, and finally, select the forgot password option. You must enter your date of birth, GPF Number, GPF series code, and name. Submit the details, and an OTP will be received on the registered mobile number. Enter the OTP and click on provide a new password. You will get the password.

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