Notes on General Provident Fund

SESSION OVERVIEW
The Scheme of General Provident Fund, commonly known as GPF, is a contributory
Scheme where every Government employee is entitled and required to become member
of the Fund by way of depositing a certain percentage of his/ her salary. The
maintenance and administration of the Fund is governed by General Provident Fund
(Central Services) Rules, 1960.
The objects and purposes of the Fund are to be an instrument of social security as
envisaged in the welfare schemes of the Government to administer resources which are
entrusted to the Fund by the eligible Government servants for the benefit of such eligible
members, to invest such resources in such manner as laid down in the General
Provident Fund Rules.
The accumulations in the fund are paid to the Government servant at the time of
retirement on superannuation or before. The needy employees are also allowed non-
refundable withdrawals from the Fund for various purposes which we will discuss during
the session.
The benefits of accumulations are also linked to other welfare scheme called ‘Deposit
Linked Insurance Scheme’, where the prescribed limit of deposit entitles the
beneficiaries of the Fund to get additional monetary benefit in the event of death of the
employee. Discussion will be made on the Scheme by way of case study to understand
the finer points involved in the admissibility of additional benefit.
LEARNING OBJECTIVE
In the session the participants will be informed about-
1 • General rules of GPF maintenance
2 • Rules of Subscriptions and Nominations
3 • Provisions and conditions of drawing advances from GPF
4 • Circumstances under which withdrawal from GPF can be made
5 • Rules of Deposit Linked Insurance Scheme

A. GENERAL PROVIDENT FUND

1. Definitions
1.1 General Provident Fund -can be described as “a Fund maintained by the
Government on account of the subscriber, i.e., the Government servant, out of monthly
‘emoluments’ of the Government servant; for his future exigencies or requirements”.
1.2 Emoluments- mean pay, leave salary and any remuneration of the nature of pay
received in respect of foreign service. But does not include Dearness Allowance.
[Rule 2 (b)]
1.3 Family - includes wife/wives except judicially separated wife, husband (unless
expressly excluded), parents, a paternal grandparent when no parent is alive, children
(including adopted children), minor brothers, unmarried sisters and deceased son’s
widow and children. A ward under the “Guardians and Wards Act, 1890”, who lives with
the Government servant and to whom the Government servant has given through a
special will the same status as that of a natural child, will also be treated as a member of
the family. [Rule 2]
2. Eligibility
These categories are eligible to contribute to the General Provident Fund-
2.1 Temporary Government servants after continuous service of one year,
2.2 Re-employed pensioners and permanent Government servants shall subscribe to
GPF compulsorily.

Compiled by J J Bajaj, AAO/Pr AG (A&E), Mumbai

2.3 Temporary Government servants may subscribe to GPF any time even before the
completion of one year’s service. [Rule 4]
3. Subscriber's account
An account is opened in the name of each subscriber to show-
1 • his subscriptions;
2 • interest, on subscriptions;
3 • advances and withdrawals from the fund.

4. Subscription
4.1 Rates of subscription - Any sum (in whole rupees) as fixed by the subscriber, subject
to a minimum of 6 % of emoluments and not more than his total emoluments.
[Rule 8 (1)]
(i) The minimum should be fixed with reference to the emoluments on the 31 st March
of the preceding year and in the case of new subscribers to the emoluments
on the date of joining the Fund.
[Rule 8]
(ii) Subscription may be increased twice and/ or reduced once at any during the
course of the year.
[Rule 8 (4)]
4.2 During Suspension- Subscription to the fund shall be stopped during suspension,
and at the option of the Government servant during leave on half pay, leave without pay
and dies non.
4.3 Before Retirement - For officials retiring on superannuation, no subscription should
be recovered during the last three months of his service.
[GID (1), Rule 7]
4.4 Interest on subscription
(i) Interest is paid to the credit of the account of a subscriber at such rate as may be
determined for each year by the Central Government in respect of the
General Provident Fund
(ii) Interest is credited with effect from the last day in each year in the following
manner:
(a) on the amount to the credit of a subscriber on the last day of the preceding
year, less sums, if any, withdrawn during the current year, interest for twelve
months;
(b) on sums withdrawn during the current year interest from the beginning of the
current year up to the last day of the month preceding the month of
withdrawal;
(c) on all sums credited to the subscriber's account after the last day of the
preceding year interest from the current year;
(d) the total amount of interest shall be rounded to the nearest whole rupee (fifty
paise and more counting as the next higher rupee).
(iii) When the amount standing to the credit of a subscriber becomes payable,
interest thereupon is credited in respect only of the period from the beginning
of the current year or from the date of deposit, as the case may be, up to the
date on which the amount standing to the credit of the subscriber becomes
payable.

Compiled by J J Bajaj, AAO/Pr AG (A&E), Mumbai

 (iv) The rate of interest can be changed by the Government at any point of time. Up
to the Year 1999-2000, the interest was at 12%, 2000-01 @11%, 2001-02
@9.5%, 2002-03 @9%, 2003-04 @ 8% and for 2004-05 it continues at 8%.
The formula for calculation of interest for a given F.Y., is as under:
Interest = Total accumulation at credit at the end of March of the given F.Y. (after
adjusting the advances taken from the Fund and their repayment) x Rate of interest x
1/12
For part of a year the formula remains same except that the period will be denoted by
the number of months for which the interest is being calculated.
5. Nomination
5.1 A subscriber can nominate one or more persons conferring the right to receive his
GPF amount in the event of his death. If more than one person is nominated, the amount
or share payable to each should be indicated clearly. A subscriber may at any time
cancel a nomination by due notice and send in a fresh nomination. A subscriber having a
family can nominate only members of his family. Subscriber having no family can
nominate any person/ persons, including a Company/ Association/ Body of Individuals/
Charitable trust or other Trust or Fund. Subject to its validity, a nomination/ notice of
cancellation takes effect from the date of its receipt by the Accounts Officer. [Rule 5]
B. ADVANCES FROM GPF
1. Purpose of advance
1.1 To pay expenses in connection with the illness, confinement or a disability including
where necessary, the travelling expenses of the subscriber and members of his family or
any person actually dependent on him.
1.2 To meet the cost of higher education including where necessary, the travelling
expenses of the subscriber and member of his family or any person actually dependent
on him; in the following cases, namely:-
(i) For the education outside India in respect of an academic, a technical, a
professional or vocational course beyond the High School stage; and
(ii) For any medical, engineering or other technical or specialised course in India
beyond the High School stage, provided that the course of study is of not less
than three years' duration.
1.3 To pay obligatory expenses on a scale appropriate to the subscribers' status which,
by customary usage the subscribers have to incur in connection with betrothal or
marriages, funerals or other ceremonies;
1.4 To meet the cost of legal proceedings instituted by or against the subscriber or any
person actually dependent upon him, the advance in this case being available in addition
to any advance admissible for the same purpose from any other government source;
1.5 To meet the cost of his defence where the subscriber engages a legal practitioner to
defend himself in an enquiry in respect of any alleged official misconduct on his part;
1.6 To purchase consumer durables like TV, VCR/ VCP, Washing Machine, Cooking
Range and Computer.
[Rule 12 (1)]
2. Amount of Advance
2.1 Normal - a sum of whole rupees and not exceeding in amount three months' pay or
half the amount standing to his credit in the fund, whichever is less, for one or more of

Compiled by J J Bajaj, AAO/Pr AG (A&E), Mumbai

the purposes stated above. The advance is recoverable in not more than 24 equal
monthly instalments.
[Rule 12 (1) & 13 (1)]
2.2 Special – There is no limit. Advance is recoverable in not more than 36 instalments if
it exceeds 3 months’ pay. [Rule 12 (2) & 13 (1)]
2.3 Consolidation of advances – When an advance is granted before complete
repayment of any earlier advance, the outstanding balance will be added to the new
advance and instalments for recovery re-fixed with reference to the consolidated
amount. [Rule 12 (3)]
3. Sanctioning Authority
3.1 The Authority competent to sanction advance of pay on transfer. If the applicant
himself is the authority, then his next higher authority will sanction the advance.
4. Recovery of advance
4.1 Recovery of advances shall commence with the issue of pay for the month following
the one in which the advance was drawn. Recovery shall not be made, except with the
subscribers consent while he is in receipt of subsistence grant or is on leave for ten days
or more in a calendar month which either does not carry any leave salary or carries
leave salary equal to or less than half pay or half average pay, as the case may be. The
recovery may on the subscribers' written request, be postponed by the sanctioning
authority during the recovery of an advance of pay granted to the subscriber.
4.2 If an advance has been granted to a subscriber and drawn by him and the advance
is subsequently disallowed before repayment is completed, the whole or balance of
amount withdrawn shall be forthwith repaid by the subscriber to the fund or in default, be
ordered by the accounts officer to be recovered by deduction from the emoluments of
the subscriber in a lump sum or in monthly instalments not exceeding twelve as may be
directed by the accounts officer. However, an opportunity should be given to the
subscriber to present his case.
4.3 Recoveries made under this rule shall be credited to the subscriber's account in the
fund.
C. WITHDRAWALS FROM THE FUND
1. Subject to the certain conditions, withdrawals may be sanctioned to the subscriber in
the prescribed form (Schedule II) by the authorities competent to sanction and advance
for special reasons, at any time, after the completion of twenty years of service
(including broken period of service, if any) of a subscriber or within ten years before the
date of his retirement on superannuation, whichever is earlier, from the amount standing
to his credit in the fund, for one or more of the following purposes, namely:-
1.1 Education - Meeting the cost of higher education, including where necessary, the
travelling expenses of the subscriber or any child of the subscriber in the following
cases, namely:-
(i) for the education outside India for academic, technical, professional or a
vocational course beyond the High School stage; and
(ii) for any medical, engineering or other technical or specialized course in India
beyond the High School stage;
1.2 Obligatory expenses - Meeting the expenditure in connection with the betrothal /
marriage of the subscriber or his sons or daughters and of any other family relation
actually dependent on him.

Compiled by J J Bajaj, AAO/Pr AG (A&E), Mumbai

1.3 Illness - Meeting the expenses in connection with the illness, including where
necessary, the travelling expenses of the subscriber and members of his family or any
person actually dependent on him.
Note: After the completion of ten years of service (including broken periods of service, if
any) of subscriber or within ten years before the date of his retirement on
superannuation, whichever is earlier, a subscriber will be allowed withdrawals from the
amount standing to his credit in the fund for one or more of the following purposes,
namely:-
1.4 Housing and related purposes
(i) Building or acquiring a suitable house or ready built flat for his residence including
the cost of the site;
(ii) repaying an outstanding amount on account of loan expressly taken for building
or acquiring a suitable house or ready built flat for his residence;
(iii) purchasing a house-site for building a house thereon for his residence or
repaying any outstanding amount on account of loan expressly taken for this
purpose;
(iv) reconstructing or making additions or alterations to a house or a flat already
owned or acquired by a subscriber;
(v) renovating, additions or alterations or upkeep of an ancestral house at a place
other than the place of duty or to a house built with the assistance of loan
from government at a place other than the place of duty;
(vi) constructing a house on a site purchased;
(vii) within six months before the date of the subscriber's retirement for the amount
standing to his credit in the fund for the purpose of acquiring a farm land or
business premises or both.
1.5 Subscription to General Insurance Scheme - Once during the course of a financial
year, an amount equivalent to one year's subscription paid for by the subscriber towards
the Group Insurance Scheme for the corporation employees on self financing and
contributory basis. [Rule 15 (1) (D)]
1.6 Purchase / Repairs/ Overhauling of Motor Car/ Motor Cycle/ Scooter etc. Rule 15,
GID (1), (2)
2. Conditions for withdrawal
2.1 Any sum withdrawn by a subscriber at any one time for one or more of the purposes,
from the amount standing to his credit in the fund shall not ordinarily exceed one half of
such amount or six months pay, whichever is less. The sanctioning authority may,
however, sanction the withdrawal of an amount in excess of this limit up to 3/4th of the
balance at his credit in the fund having regard to
(i) the object for which the withdrawal is being made,
(ii) the status of the subscriber, and
(iii) the amount to this credit in the Fund.
[Rule 16 (1)]
2.2 In respect of purposes under (IV) above - housing and related matters, withdrawal
limit is up to 90% of balance at credit.
3. Conversion of an advance into a withdrawal

Compiled by J J Bajaj, AAO/Pr AG (A&E), Mumbai

3.1 A subscriber who has already drawn or may draw in future an advance for any of the
purposes specified therein may convert, at his discretion by written request addressed to
the accounts officer through the sanctioning authority, the balance outstanding against it
into a final withdrawal on his satisfying the conditions.
[Rule 16-A]
4. Final withdrawal of accumulations in the fund
4.1 Final withdrawal can be made-
(i) When subscriber quits the service.
(ii) When he is dismissed/ removed from service.
(iii) When he proceeds on leave preparatory to retirement.
(iv) When he retires from service/ permitted to retire or declared by a Competent
Medical Authority to be unfit for further service.
4.2 If a subscriber, who has been dismissed from the service and is subsequently
reinstated in the service, shall, repay any amount paid to him from the fund in pursuance
of this rule, with interest thereon at the rate prescribed either in cash or securities or
partly in cash and partly in securities or as directed by the Competent Authority. The
amount so repaid shall be credited to his account in the fund.
4.3 When a Government servant is transferred without any break in service to a new
post under a State Government or in another department of the Central Government (in
which he is governed by another set of provident fund rules) and without retaining any
connection with his former post, in such case, his subscriptions together with interest
thereon shall be transferred-
(i) to his account in the other fund in accordance with the rules of that fund, if the new
post is in another department of the Central Government, or
(ii) to a new account under the State Government concerned if the new post is under
a State Government and the State Government consents, by general or
special order, to such transfer of his subscriptions and interest.
Note : Transfers shall include cases of resignation from service in order to take up
appointment under a body corporate owned or controlled by government or an
autonomous organisation, with proper permission of the Central Government. The time
taken to joint the new post shall not be treated as a break in service if it does not exceed
the joining time admissible to a government servant on transfer from one post to another.
4.4 Interest – Interest is payable on the balance up to six months from the date the
subscriber ceases to be in service. If the payment is delayed beyond six months due to
administrative reasons, interest can be allowed up to one year by the Head of the
Accounts Office. [Rule 11 (4)]
5. Other circumstances of final payment of accumulation in PF
5.1 Death of subscriber during service- The amount standing to his credit is payable to
the nominee/ members of family in the proportion specified.
5.2 Subscriber goes missing - When the subscriber is suddenly missing or disappearing
and whose whereabouts are not known, the balance at credit of his GPF account can be
paid to his family having regard to the nomination in the proportion specified, only if
(i) the family lodges a police complaint and gets a report that in spite of the efforts
the employee is not traceable.

Compiled by J J Bajaj, AAO/Pr AG (A&E), Mumbai

 (ii) an indemnity bond is submitted by the nominee/ dependents that the payments
will be adjusted against the payments due to the employee in case he
appears and makes a claim.
D. DEPOSIT LINKED INSURANCE SCHEME
1. Eligibility
1.1 On the death of a GPF subscriber who has put in five years’ of service, the person
entitled to receive the amount standing to the credit of the subscriber shall be paid by the
accounts officer an additional amount equal to the average balance in the account during
the 3 years immediately preceding the death of such subscriber. This payment is subject
to the condition that the balance at credit had not fallen below the under mentioned limits
at any time during the 3 years preceding the month of death:-
If the subscriber was drawing Monthly minimum balance during
the period

Grade Pay of Rs 4800 pm or more Rs 25,000

Grade Pay 4200 pm or more bus less than Rs Rs 15,000

4800 pm

Grade Pay of Rs 1400 pm or more but less Rs 10,000

than Rs 4200

Grade Pay less than Rs 1400 pm Rs 6,000

2. Amount
2.1 The additional amount will be equal to the average balance at the credit of the
subscriber at the end of each of the 36 months preceding the month in which the death
occurs, subject to maximum of Rs 60,000. For this purpose, as also for checking the
minimum balances prescribed above:
(i) The balance at the end of March shall include the annual interest.
(ii) If the last of the aforesaid 36 months is not March, the balance at the end of the
said last month shall include interest in respect of the period from the
beginning of the financial year in which death occurs, to the end of the said
last month.
3. Mode of Payment
Payments under this scheme should be in whole rupee. If an amount due includes a
fraction of a rupee it should be rounded to the nearest rupee (50 paise counting as the
next higher rupee).
Note: Any sum payable under this scheme is in the nature of insurance money and,
therefore, the statutory protection given by section 3 of the Provident Funds Act, 1925
(19 of 1925), does not apply to sums payable under this scheme.

4. Conditions

Compiled by J J Bajaj, AAO/Pr AG (A&E), Mumbai

4.1 In case of persons appointed on tenure basis and in the case of re-employed
pensioners, service rendered from the date of such appointment or re-employment, as
the case may be only, will count for purpose of this rule.
4.2 The DLI Scheme does not apply to persons appointed on contract basis.
4.3 Admissible on death after the working hours of the last working day but before 12
midnight as this will be treated as “death while in service”.

Compiled by J J Bajaj, AAO/Pr AG (A&E), Mumbai

Applying the rules of DLIS, the period of 36 months will start at May’02 when the balance
was Rs 18,800.
As the employee was drawing pay of Rs 5,000, in order to qualify for additional benefit
under DLIS his monthly balance in the 36 months preceding his should not have fallen
below Rs 10,000. However, as we can see from the monthly balances of July and
Aug’04, the amount has fallen below Rs 10,000. As such, the family of the employee will
not get any additional benefit.
Had the balance remained above the limit of Rs 10,000 in July and Aug’04, the family
would have received additional benefit equal to the average of monthly balances from
May’02 to April’05 (including interest).
SUMMARY
At the end of the session participants will understand the Rules of making withdrawals
from GPF and taking advances from the Fund in case of necessity. They will also
appreciate the importance of maintaining a specified balance in the Fund in order to be
eligible to additional benefits.
The practical examples discussed during the session will help participants to calculate
the interest admissible on the yearly subscription. They will be able to detect errors, if
any, in the yearly balances.