Centre announced that the interest rate on the general provident fund (GPF) and other related funds are maintained unchanged at 7.1 per cent for the FY 2024 second quarter. The rate was maintained unchanged for the last 17 quarters, as the Finance Ministry considers rate review GPF and related provident funds for government employees every three months.
A gazetted notification by the Department of Economic Affairs (DEA), Ministry of Finance, on June 10, 2024 states, “It is announced for general information that during the year 2024-2025, accumulations at the credit of subscribers to the General Provident Fund and other similar funds shall carry interest at the rate of 7.1 per cent w.e.f. 1st April, 2024.” As many as 10 other related funds were listed as having the same 7.1 per cent interest rate including The General Provident Fund (Central Services), The Contributory Provident Fund, All India Services Provident Fund, State Railway Provident Fund etc.
The General Provident Fund (GPF) is a retirement savings scheme for permanent government employees and temporary employees with one year of continuous service. They can contribute 6 per cent of their salary to up to Rs 5 lakh in one financial year.
There is no monthly payout and subscribers in GPF can withdraw funds upon retirement or premature exit from government service and make partial withdrawals after 15 years of service.
Different Types Of Provident Funds
Apart from the General Provident Fund (GPF), the Public Provident Fund (PPF) and the Employees’ Provident Fund (EPF) are the other popular categories of provident funds in India.
GPF only covers government employees, PPF admits employees from any sector while EPF covers private sector employees.
Public Provident Fund (PPF) investment aims to help both government and private sector employees build a sufficient retirement corpus. It is popular for its taxable-exempt-exempt (TEE) category. It helps save taxes by allowing deductions under Section 80C up to Rs 1.5 lakh under the old tax regime. The current interest rate of PPF is the same as GPF at 7.1 per cent per annum. It comes with a lock-in period of 15 years but comes with an extension facility to be continued in blocks of 5 years. The minimum annual contribution to keep the account active is Rs 500, and the maximum contribution is Rs 1.5 lakh per annum.
Employees’ Provident Fund (EPF) currently provides 8.25 per cent interest and exclusively caters for employees of the private sector. Private companies with over 20 employees have to enrol in the EPF scheme and mandatorily deduct provident fund contributions of up to 12 per cent from the salary of employees. An equal contribution will also be provided by employers on behalf of employees. As much as 8.33 per cent of the employer's contribution goes to the Employees Pension Scheme (EPS). Contributions along with interest can be withdrawn upon retirement. Premature withdrawal is allowed in case of advances for housing, post-matriculate education of children, marriage, treatment expenses, etc.
