Provident fund, a retirement savings plan, reaps benefits at maturity. In a provident fund account, the customer invests a part of his/her salary in the account for a certain period of time and avail the amount on maturity. There are three major provident fund accounts available in the country- Employees' Provident Fund (EPF) or PF account, Public Provident Fund (PPF) account and General Provident Fund (GPF) account. EPF is a compulsory retirement saving option with a minimum lock-in period of five years. Public Provident Fund (PPF) account is an investment avenue with income tax benefits. GPF account is a provident fund account available only for government employees.
Companies employing more than 20 people have to compulsorily make contributions towards the EPF. This means, both the employee and the employer make equal contributions towards the EPF kitty. Currently, all members of Employees' Provident Fund Organisation (EPFO) get an interest rate of 8.55 per cent on their Employees' Provident Fund (EPF) deposit.
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. The contribution into EPF is deducted under section 80 C of the Income Tax Act up to a limit of Rs 1,50,000.
Interests on deposits in PPF are compounded on an annual basis, which means that it is added to the principal amount every year. The interest rate on PPF has been fixed at 8 per cent for the current quarter. A minimum of Rs 500 subject to a maximum of Rs.1,50,000 per annum can be deposited in a PPF account. The amount can be deposited in lump sum or in a maximum of 12 installments per year.
A PPF account matures in 15 years. Partial withdrawal is allowed every year from the seventh financial year from the year of opening account. Income Tax benefits are available under Section 88 of Income Tax Act. Interest income is totally exempt from Income Tax. Amount outstanding to the credit is fully exempted from Wealth Tax also.
Interest rates on GPF are revised according to government's notifications issued from time to time. GPF is offering 8 per cent interest in the quarter ending December 2018. A government employee becomes a member of GPF by contributing a certain percentage of his/her salary to the account.
A subscriber can subscribe monthly to GPF except during the period when he is under suspension. Subscriptions to the general provident fund are stopped three months prior to the date of superannuation. On retirement of a subscriber, instructions are issued for immediate payment of the final balance on retirement.
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