Understand GPF which is deducted from the salary of government employees, its benefits will surprise you, how is it better than PF?
What is the General Provident Fund (GPF)?
Government employees are likely familiar with the General Provident Fund (GPF). They consider it a highly reliable and beneficial savings scheme. This scheme not only ensures regular savings from your salary but also provides a strong foundation for financial security after retirement. If you're a government employee, you've likely seen the "GPF deduction" on your salary slip. Many employees are confused about this deduction, but it can truly be considered an important part of your long-term financial security.
What is GPF, and how does it work?
GPF, or General Provident Fund, is a savings scheme exclusively for government employees. Every month, a fixed portion of your salary (basic + DA) is deducted with your knowledge and deposited into this fund. This money is kept safe with the government and earns interest. The most important thing is that GPF is completely under government control, so there is no investment risk involved, meaning market movements do not affect this fund.
Interest Rate and Return Features
Currently, GPF offers an annual interest rate of 7.1%, which is reviewed by the government every three months. This interest rate is considered stable and reliable compared to many other savings schemes. If an employee invests in GPF consistently for 15 years, he or she can receive a corpus of approximately ₹31.60 lakh at the time of retirement. With regular investment for 10 years, this amount can reach approximately ₹17.20 lakh.
Who will have to pay tax on GPF?
Under Rule 9D of the Income Tax Rules, 1962, non-government employees will now be required to pay tax on the interest earned on their EPF (Employees' Provident Fund) if the annual contribution by their employer exceeds ₹2.5 lakh. For government employees, this limit is set at ₹5 lakh, provided there is no employer contribution to their provident fund. This provision was implemented by the Central Board of Direct Taxes (CBDT) last year. The purpose of this rule is to bring more interest income into the tax net and make the savings system transparent.
Who can invest?
GPF (General Provident Fund) is a government savings scheme in which only government employees can invest. This scheme is available to permanent government employees or temporary employees with more than one year of service. This scheme is specifically for employees who joined government service before January 1, 2004, as the National Pension System (NPS) was implemented for employees appointed after that time. Re-employed pensioners can also invest in this scheme, provided they are not contributing to any other provident fund.
Financial Security in Retirement
After retirement, when your salary ends, GPF funds become your biggest financial strength. It can easily handle household expenses, children's education, medical emergencies, or any major expense. The government guarantees this fund, so it is completely safe.
Why is GPF special?
GPF is a reliable long-term investment plan for government employees. There is no market risk, the interest rate remains stable, and the lump sum received upon retirement is tax-free. This plan not only provides employees with financial security but also gives them peace of mind that their future is secure.
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