Difference between GPF, EPF, and PPF

There are different types of provident funds designed to serve specific industries and goals. The most prevalent types are General Provident Fund (GPF), Employee Provident Fund (EPF), and Public Provident Fund (PPF). 
GPF is predominantly for government personnel, whereas EPF is for private sector employees and PPF is open to every individual, regardless of the profession. While they share the objective of long-term savings, each has distinct features such as contribution rates, interest rates, and withdrawal criteria. 

Understanding the differences between these different types of PFs is crucial for individuals to make informed decisions regarding their financial planning and retirement savings. However, before delving deeper into their differences, it’s essential to know each of these terms. 

What is GPF?

GPF serves as a vital savings avenue exclusive to government sector employees within India. Workers employed under the Government of India are mandated to contribute a minimum of 6% of their salary towards this fund, ensuring a secure financial cushion upon retirement. Managed by the Department of Pension and Pensioner’s Welfare under the Ministry of Personnel, Public Grievances, and Pensions, GPF offers a steady current interest rate of 7.1%.

Eligibility Criteria for GPF

Here is the list of professionals eligible for this type of PF fund:

• Employees of the Government of India
• Temporary government servants with continuous service of at least one year
• Re-employed pensioners (excluding those eligible for the Contributory Provident Fund)

Contribution GPF

The contribution rate to GPF is determined by the employee, with a minimum threshold of 6% of their total emoluments. However, the maximum contribution limit stands at 100% of the employee’s salary. The government periodically adjusts the interest rate on GPF, aligning it with prevailing market trends. Recently, the government announced a reduction of 0.8% in the GPF interest rate. These regulations ensure transparency and stability in GPF management, empowering government employees to secure their financial futures effectively.

GPF Advances

GPF provides refundable advances for an array of objectives, including education, medical emergencies, marriage, and housing or consumer durable acquisition. Subscribers can withdraw up to 12 months' wages or three-fourths of their GPF balance, with the option of withdrawing 90% under certain conditions. 
Furthermore, repayment is interest-free and takes up to 60 months. Multiple claims are permitted, including during repayment. If a fresh advance is made before complete payback, the outstanding balances are consolidated, with altered installment schedules. 

Tax Exemptions of GPF

Contributions to GPF are eligible for tax exemptions under Section 80C of the Income Tax Act. Additionally, interest earned and withdrawals at the time of retirement are also tax-free. 

What is EPF?

Administered by the Employees’ Provident Fund Organisation (EPFO), EPF is a significant government-backed savings system that provides social security for organised sector employees. Under this plan, companies with 20 or more workers have been legally required to register with EPF. Aside from retirement benefits, EPF members are entitled to a pension under the Employees’ Pension Scheme (EPS) after 10 years of cumulative service.

Under EPF, employees contribute 12% of their basic salary (up to Rs. 15,000), matched by the employer. The employer's contribution is allocated with 8.33% to EPS and 3.67% to EPF. Presently, the EPF interest rate is fixed at 8.15%. Typically, withdrawal is permissible at age 58, yet partial withdrawals are allowed for contingencies like unemployment, medical needs, education, or marriage.

Eligibility Criteria for EPF

The eligibility criteria for EPF in India are as follows:

• Any individual employed in an organisation covered under the EPF Act, 1952.
• Working professionals earning a basic salary of up to Rs. 15,000 per month. (This threshold may vary depending on government regulations.)
• Contractual and temporary employees may also be eligible, depending on their contract terms and regulations.

What is PPF?

PPF, established in 1968 under the Public Provident Fund Act, serves as a government-backed long-term savings and tax-saving scheme. Unlike the GPF and EPF, PPF enrollment is open to both employed and self-employed individuals. Managed by the Department of Economic Affairs under the Ministry of Finance, PPF allows contributions ranging from a minimum of Rs. 500 to a maximum of Rs. 1.5 Lakh annually. Currently, the interest rate of PPF is 7.1%. 
The lock-in period of this plan is 15 years, but premature closure is permitted in specific circumstances like medical emergencies or education expenses, incurring a 1% penalty on interest earned. In addition to this, after 7 years of contributions, subscribers can avail loans up to 50% of the total balance at the end of the 5th year. 

Eligibility Criteria for PPF

Here are the eligibility criteria for opening a PPF account in India:

• Open to both working professionals (salaried and self-employed).
• Minors can have a PPF account opened in their name by a parent or guardian.
• PPF accounts can be opened in designated bank branches, post offices, and authorised institutions.

Tax Exemptions of PPF

Contributions made to a PPF account are eligible for tax deductions under Section 80C of the Income Tax Act, allowing investors to claim deductions of up to Rs.1.5 Lakh annually. Furthermore, the maturity proceeds of a PPF account, including both the principal amount and accumulated interest, are fully exempt from taxation.

GPF vs PPF vs EPF

Here’s a comparison table demonstrating the differences between GPF, EPF, and PPF:

Please note that interest rates and specific terms may vary over time and depend on government regulations and policies. It's advisable to check the latest updates from relevant authorities or financial institutions for the most accurate information. 

Conclusion

In summary, while all three provident fund types serve long-term savings goals, each has unique features in terms of eligibility, contributions, interest rates, and withdrawal conditions, giving a variety of options for long-term savings and financial stability. Understanding these contrasts is critical to smart financial planning.