What Is A General Provident Fund, And How Does It Work?
The General Provident Fund (GPF) is a good tool for government employees to save. Employees can donate a percentage of their compensation on a regular basis until they leave the company. Upon retirement, the employer transfers the entire amount accumulated in the GPF account to the employee. Continue reading to learn more about the general provident fund.
What is a General Provident Fund (GPF)?
In India, every government employee has access to a GPF account, which is similar to a PPF account. Government personnel can also use this account to contribute a percentage of their salaries to the General Provident Fund. As a result, when the employee retires, he or she receives the entire amount accrued over his or her employment time. Interest rates on the GPF are modified on a regular basis to meet government criteria. GPF, on the other hand, has a current interest rate of 7.1 percent (w.e.f 1st January 2022 to 31st March 2022). Individual subscribers must contribute money to the General Provident Fund after they have applied, unless they are suspended. Payments to the GPF account can also be halted three months before retirement, according to government regulations.
Features of General Provident Fund
Some features of General Provident Fund are as follows:
1. Management
The Department of Pension and Pensioner Welfare of the Ministry of Personnel, Public Grievances, and Pensions is in charge of the GPF scheme.
2. Membership
Government employees must begin contributing a percentage of their salary to the GPF account in order to become members, according to the Pensioners official webpage.
3. Contribution
Contributions to the GPF account must be made on a monthly basis unless the subscription is suspended. Three months prior to retirement or superannuation, subscriptions will likewise be suspended.
4. Payment
When a subscriber retires, the remaining balance is instantly paid. Furthermore, to collect the final payment from the General Provident Fund, no application form is required.
5. Nomination
When joining the fund, the subscriber must name a family member. As a result, the nominee is entitled to the fund's accumulated funds in the event of the subscriber's death.
6. Death Benefit
The nominee is entitled to an additional payment under the GPF standards in the event of the corresponding individual's death. As a result, the additional sum is equal to the average GPF account balance for the three years preceding the individual's death. This, however, is contingent on a number of factors. The total amount owed under this rule shall not exceed Rs. 60,000. Furthermore, the nominee can only get this benefit if the subscriber worked for at least 5 years at the time of death.
7. Tax Rebate
GPF investors are eligible for tax benefits on interest earned, donations, and refunds under Section 80C of the Income Tax Act of 1961.
How Does the General Provident Fund Work?
The General Provident Fund (GPF) is a good tool for government employees to save. Until the employee leaves the company, he or she can contribute a portion of his or her pay on a regular basis. The employer transfers the total accumulated money in the GPF account to the employee upon retirement.
Take Away
If a government employee wishes to register a GPD Account, it is a great method to save for future financial goals like a child's education, marriage, a home, or even a medical emergency.
Disclaimer: This article is issued in the general public interest and meant for general information purposes only. Readers are advised not to rely on the contents of the article as conclusive in nature and should research further or consult an expert in this regard.
