Employees’ Provident Fund (EPF) or PF account, Public Provident Fund (PPF) account and General Provident Fund (GPF) account are three major provident fund accounts available in the country. In these provident fund accounts, a subscriber invests a part of his/her salary for a certain period of time and avail amount on maturity. Interest rates on these schemes are revised according to notifications issued from time to time. While EPF and GPF are compulsory retirement saving options, Public Provident Fund (PPF) account is an investment avenue with income tax benefits.
What Are the Different Types of PFs?
There are mainly three different types of PFs, which exist amongst the various financial instruments that are a part of this realm of services. These include the following:
- The General Provident Fund is a type of PF which is maintained by governmental bodies, including local authorities, the Railways and other such bodies. Thus, these types of PFs are mainly defined by the government bodies.
- The Employee Provident Fund is the one which applies to all privately-owned organizations that contain more than 20 employees. Moreover, holding a rightful claim to the PF associated with your organization, you will be given a UAN or Universal Account Number. This enables you to transfer your PF funds from one employer to another whenever you move from one occupation to another.
- The Public Provident Fund is defined by the voluntary nature of investment on the part of the employee. The PPF is also associated with a minimum deposit of INR 500 and a maximum amount of INR 1.5 lakhs. This PF also comes with a pre-determined maturity period of 15 years, only after which any form of withdrawal can be done from the account.
Employees of an organization are directly eligible for availing Provident Fund, insurance benefits as well as pension benefits since the day they join the organization. Any organization employing a minimum of 20 workers is liable to give EPF benefits to the workers.
GPF and PPF
Both salaried and self-employed individuals can invest in PPF while only government employees can invest in GPF. Government employees who are residents of India can invest in GPF, only if they have joined the service before 1 January 2004. Any Indian citizen aged 18 years and above can invest in PPF. Only one PPF account can be opened and maintained per individual except for accounts that are opened on behalf of minors. Non-Resident Indians (NRIs) and Hindu Undivided Family individuals are not eligible for PPF.
GPF account matures at the time of retirement. PPF lock-in period is 15 years from the date of opening the account. Post maturity, the account tenure can be extended in blocks of 5 years each. EPF account matures at the age of 58years.
GPF – The government staff will now get a 7.9 percent interest on the contribution made during the July-September period according to a recent report. The new interest rate of GPF will cover the General Provident Fund (Central Services), the Contributory Provident Fund (India), the All India Services Provident Fund, the State Railway Provident Fund, the General Provident Fund (Defence Services), the Indian Ordnance Department Provident Fund, the Indian Ordnance Factories Workmen’s Provident Fund, the Indian Naval Dockyard Workmen’s Provident Fund, the Defence Services Officers Provident Fund and the Armed Forces Personnel Provident Fund.
EPF – All the subscribers of Employees’ Provident Fund Organisation (EPFO) get an interest rate of 8.65 percent on their Employees’ Provident Fund (EPF) deposit.
PPF has been fixed at 7.9 percent interest rate for the current quarter.
Partial withdrawal from EPF accounts is allowed for purchase/construction of house, repayment of loan, non-receipt of wage for two months, marriage of self/daughter/son/brother, for medical treatment of family members etc. GPF also allows partial withdrawal at certain conditions. Partial withdrawal is allowed in PPF account every year from the seventh financial year from the year of opening account.
Under Section 80C of the Income Tax Act, 1961, contributions, interest accrued, and final withdrawals from PPF are exempted from tax. The final GPF withdrawals are tax free, but, the initial contributions are not. In EPF amount withdrawn is less than Rs 50,000 before completion of 5 continuous years of service No TDS. However, if the individual falls under the taxable bracket, he has to offer such EPF withdrawal in his return of income. Amount withdrawn is more than Rs 50,000 before completion of 5 years of continuous service TDS @ 10% if PAN is furnished; No TDS in case Form 15G/15H is furnished. Withdrawal of EPF after 5 years of continuous service will be no TDS.
GPF Advance is a facility offered to the account holder/employee wherein he or she can obtain loan against GPF throughout his or her career. The loan can be repaid in regular instalments. No interest rate is applied to the borrowed sum. Any number of GPF cash advances can be availed of by the employee. Loan against PPF can be availed of between the 3rd and 6th year of opening the account. Up to 25% of the PPF account balance can be obtained as loan. The employee should be in service for 5 years to be eligible to get loan against EPF. An individual having a EPF account can withdraw funds from the account as loan. Partial withdrawal is possible in case the loan is towards buying/repairing a house.