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General Provident Fund (GPF) Scheme

15th May, 2024 Economy

General Provident Fund (GPF) Scheme

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  • The Madras High Court ruled that employees are not automatically entitled to pension benefits based on GPF scheme deductions in the case of Pipmate Integrated Staff Welfare Association vs. Chief Secretary, Government of Puducherry.

What is the General Provident Fund (GPF)?

  • The full form of GPF is the General Provident Fund.
  • It is a savings and pension plan introduced in 1960 for government employees in India.
  • GPF serves as a long-term investment option that allows you to contribute a portion of your salary each month. The accumulated funds, along with interest are provided to you upon retirement.

General Provident Fund (GPF)

  • The General Provident Fund (GPF) is a savings scheme established in 1960 to cater to the financial needs of government employees in India.
  • It serves as a long-term investment option, allowing employees to accumulate savings over their employment tenure.


  • The scheme is administered by the Department of Pension and Pensioners’ Welfare, falling under the Ministry of Personnel, Public Grievances and Pensions.
  • Both the employee and the government contribute to the fund, with deductions made from the employee's monthly salary.


  • Primary Goal: The primary objective of the GPF is to provide a dependable source of retirement income for government employees. By contributing to the GPF, employees can build a financial cushion for their post-retirement years.
  • Investment Benefits: The GPF offers several benefits to government employees, including tax savings, low-risk investments, and guaranteed returns. The scheme provides a competitive interest rate, which is revised quarterly, making it an attractive investment option.

Withdrawal and Benefits

  • Withdrawal: Employees can withdraw their savings from the GPF upon retirement or resignation from service. Additionally, the GPF allows for flexible withdrawals for specific needs such as marriage, education, and medical emergencies. This feature provides financial flexibility and support during critical life events.
  • Benefits: The GPF offers various benefits to employees, including tax savings on contributions, the security of low-risk investments, and the assurance of guaranteed returns. These benefits make the GPF a valuable investment avenue for government employees seeking financial stability and security.

Key Features

  • Mandatory Scheme: The GPF is a mandatory scheme for government employees, requiring them to contribute a certain percentage of their salary towards the fund. This ensures that employees actively participate in building their retirement savings.
  • Interest: Contributions to the GPF earn interest at a predetermined rate, providing employees with an opportunity to grow their savings over time.
  • Security: The GPF is considered a secure way to save for retirement and unforeseen circumstances. With its low-risk nature and guaranteed returns, the GPF offers employees peace of mind regarding their financial future.

Interest Rate

  • Current Rate: The GPF currently offers an interest rate of 7.1%. This rate is subject to periodic revisions by the government.

Subscription Fee

  • Monthly Subscription: Employees are required to pay a monthly subscription fee into their GPF account, except during suspension periods.

Subscription Halt

  • Pre-Superannuation: Subscriptions to GPF are halted three months before the superannuation date, as specified in the pension portal of the Government of India.

Final Payment Process

  • Application Not Required: Employees do not need to submit an application for the final payment from the GPF. The process is initiated automatically.

Nomination for Death Benefit

  • Nomination Requirement: To receive the accumulated credit in the event of the employee’s death, the employee must nominate a family member while registering for the fund.

Additional Payment

  • Entitlement: As per GPF regulations, the nominee is entitled to receive an additional payment equal to the average balance in the deceased employee’s account over the three years preceding the employee’s death.

Maximum Coverage

  • Limit: The maximum additional amount covered under this scheme is Rs. 60,000.
  • Additionally, the employee must have actively worked for at least five years to be eligible for this benefit.

GPF Contribution Amount

  • Fixed Percentage: The GPF contribution is fixed at 6% of the basic salary for employees in Group A, B, and C categories.
  • Increase Option: However, employees have the option to increase their GPF deductions up to 100% of their basic pay if they wish to contribute more towards their GPF account.


  • For instance, if an employee has a basic pay of Rs. 50,000, the minimum GPF contribution would be Rs. 3,000 (6% of 50,000).
  • However, employees can choose to increase their GPF deduction to a maximum of Rs. 50,000 (100% of 50,000) monthly, providing them with flexibility in managing their contributions.

GPF Advances

General Provident Fund (GPF) advances provide employees with the option to obtain loans against their GPF balance for specific purposes. Here's how GPF advances work:

Purpose and Conditions

  • Loan Purpose: GPF advances are intended for specific purposes such as education, medical emergencies, housing, or other personal needs.
  • Conditions: GPF advances are subject to certain conditions, and the rules may vary between government departments.

Loan Amount

  • Limit: The amount employees can borrow as an advance is typically limited to a percentage of their GPF balance.
  • Maximum: The maximum amount that can be borrowed is usually 75% of the GPF account balance or 12 months' basic pay, whichever is less.
  • Exceptional Circumstances: In certain exceptional circumstances, the authority approving GPF withdrawals may permit withdrawal of up to 90% of the account balance.

Sanction and Disbursement

  • Timeline: GPF advances must be sanctioned and credited within fifteen days from the date of the employee's request.
  • Documentation: No documentary proof is required to be furnished by the employee to claim a GPF advance.


  • Instalments: Employees can repay the advance in 60 monthly instalments.
  • Deductions: Repayments are typically made through monthly deductions from the employee's salary.
  • Interest-Free: GPF advances do not incur any interest, making them an attractive option for employees requiring funds for specific purposes.

Multiple Claims

  • Throughout Careers: Account holders can make multiple claims for GPF advances throughout their careers.
  • New Advances: Even if an employee is repaying an existing GPF advance, they can request a new advance as needed.

The Interest Rate of the General Provident Fund (GPF)

  • The interest rate of the General Provident Fund (GPF) is determined and reviewed annually by the government.
  • As of 2022-2023, the interest rate on GPF stands at 7.1%. This interest is calculated yearly and credited to the employee's GPF account at the end of each financial year.

Eligibility for General Provident Fund

  • Government Employees: Employees of the central government and certain state government employees are eligible for GPF.
  • Opting Out: Employees should not have opted for any other provident fund scheme provided by the government or any other organization.
  • Deputation: Employees on deputation outside India are not eligible for GPF.
  • Temporary Employees: Temporary employees who have completed one year of continuous service are also eligible for GPF.

Maturity and Withdrawal Process of GPF

The maturity and withdrawal process of GPF is as follows:

  • Maturity: The GPF account matures when the government employee retires or reaches the superannuation age.
  • Withdrawal Eligibility: Employees can withdraw their GPF funds for various reasons, provided they have completed ten years of service or have ten years left until their superannuation date, if continuously employed in government service.
  • Resignation: If an employee resigns from their job at any point, they can withdraw their GPF balance regardless of their service tenure.
  • Withdrawal Options: After maturity, the employee can withdraw the complete balance or opt for a monthly pension.
  • In Case of Death: In the event of the employee's death, the balance in the GPF account is paid to the nominee or legal heir nominated by the employee.

Benefits of Investing in a General Provident Fund (GPF)

Investing in a General Provident Fund (GPF) offers several benefits for government employees:

Secure Retirement

  • Post-Retirement Security: GPF investment ensures a secure retirement for government employees by providing a reliable source of funds post-retirement.

Guaranteed Returns

  • Stable Returns: The GPF offers guaranteed returns at a fixed interest rate, which the government reviews and revises periodically. This stability provides peace of mind to investors.

Tax Benefits

  • Tax Deduction: Contributions made to GPF are eligible for tax deduction under Section 80C of the Income Tax Act. This helps employees save on their taxable income.

No-Risk Investment

  • Government Backing: GPF is a no-risk investment option as it is backed by the government. Employees can trust in the security of their investment, knowing that it offers a fixed rate of return.

Loan Facility

  • Financial Assistance: Employees can avail themselves of loan facilities from GPF for various purposes, including house construction, education, and medical expenses. This feature provides financial flexibility and support during times of need.


  • Withdrawal Options: GPF investments provide flexibility regarding withdrawal and partial withdrawal options. Employees can avail of these options in case of emergencies or unforeseen expenses, ensuring financial stability during challenging times.

Difference Between GPF, EPF, and PPF






General Provident Fund

Employees Provident Fund

Public Provident Fund

Eligibility Criteria

Government employees

Private employees

All individuals

Interest Rates




Maturity Period

Till retirement

Till retirement (Up to 58 years of age)

15 years

Minimum Deposit

6% of the basic salary

12% of the basic salary

Rs 500 p.a.

Maximum Deposit

100% of the basic salary

12% of the basic salary

Rs 1.5 lakh p.a.

Premature Closure

If the individual quits their government job

Being unemployed for more than 60 days

Allowed after 5 years for emergency purposes



Q. Consider the following statements regarding the General Provident Fund (GPF) in India:

1.Subscriptions to GPF are halted three months before the superannuation date.

2.Employees on deputation outside India are not eligible for GPF.

3.Temporary employees who have completed one year of continuous service are also eligible for GPF.

Which of the above statements are correct?

a) 1 and 2 only

b) 1 only

c) 1 and 3 only

d) All

Answer: d) All