GPF (General Provident Fund) is a savings facility that provides public sector employees with a secured saving opportunity. This fund has been in existence since colonial times and is a remarkable scheme that enables government employees to save regularly for their retirement.
For the financial year 2021-22, there are some essential facts that you need to know about GPF, which is what we’ll discuss in this article.
Contribution Limit
The minimum amount of deduction from employee’s salaries is 6% of their basic pay, while the maximum amount is 100% of the basic pay plus dearness allowance (DA) in case of a loan in advance. However, the total deduction amount, including the employer’s share, cannot exceed the total basic pay plus DA.
Interest Rate
The GPF interest rate is reviewed every quarter, and the rate for the first quarter (April – June) of 2021-22 is 7.1%, which is the same as the last quarter of the previous financial year. It’s worth noting that the interest rate earned on this fund is higher in general compared to other saving schemes.
Tax Implications
The contributions made to GPF qualify for tax deductions under section 80C of the Income Tax Act. However, the interest earned is taxable. This means that the employer has to deduct TDS on the interest earned on the employee’s contribution if the interest earned exceeds Rs. 2.5 lakhs per financial year.
Withdrawal Options
The GPF account has different withdrawal options, such as partial withdrawal and full withdrawal. However, withdrawals are subject to specific terms and conditions and depend on the purpose of withdrawal. For instance, partial withdrawals can only be made after the account has been active for five years.
Loan Facilities
GPF account allows employees to take loans against their balance. The loan repayment period ranges from 12 months to 60 months, depending on the purpose of the loan. However, the repayment period and the loan amount depend on the employee’s service period and the remaining years of service.
In conclusion, GPF is an attractive saving scheme for government employees. However, it’s vital to be well-informed before making any contributions or withdrawals. The above facts and insights should help you make informed decisions regarding your GPF account during the financial year 2021-22.
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