29-08-2022 |
In an age where economic vulnerabilities and market fluctuations pose new problems, investing money in savings instruments might help you handle your finances more effectively. Savings not only have the significant monetary capability but also guarantee a solid foundation for the period when your regular source of income comes to a stop. On that basis, it is critical to build a stable corpus that may cover all of your present and future situations.
Nevertheless, with a variety of saving plans dotting the horizon nowadays, selecting the one that best matches your individual wants and expectations has become a difficult chore. How do you select a plan that meets your long-term financial goals while also meeting your immediate financial needs? Which plan can fit your investment duration while also allowing you term-based pliability? Is there an option that allows you to invest based on your risk tolerance while yet maintaining a respectable reward profile?
The notion of a PF (Provident Fund) was created by the Indian Government to address precisely such difficulties. There are three kinds of PF in India: GPF (General Provident Fund), PPF (Public Provident Fund), and EPF (Employees' Provident Fund).
Each of the above-mentioned provident funds encourages savings practice when a person has a regular source of income. It aids in the accumulation of adequate cash that may be utilised to pay costs when an individual's income is insufficient. Nevertheless, there are numerous fundamental distinctions between GPF and PPF, as well as EPF, that must be considered.
In this article, we will give you a comparative analysis of the General Provident Fund and Public Provident Fund in depth and detail. Continue reading to learn more.
GPF: What Exactly Is It?
The GPF or General Provident Fund is an excellent way for government workers to save money. Employees can donate a percentage of their wages on a regular basis until they leave the government agency. Upon retirement, the recruiter transfers the entire accumulated sum in the General Provident Fund account to the employee.
Features and Benefits of GPF (General Provident Fund)
Listed below are the features and benefits of GPF:
- Under the 1961 Income Tax* Act (under Section 80C), GPF investors are entitled to tax* *benefits on earned interests, refunds, and gifts.
- If the associated individual passes away, the beneficiary is entitled to further payment as per GPF criteria. This particular benefit is only accessible to employees who have worked for a minimum of 5 years at the time of their death.
- An individual doesn't need to go through any additional processes when collecting final payment from a General Provident Fund account.
PPF: What Exactly Is It?
The Government of India's PPF or Public Provident Fund is a retirement plan for savings that aims to offer every individual safe and secure post-retirement living. Every fiscal year, at least a deposit of ₹500 is required, with up to a ₹1.5 Lakh deposit. You may claim income tax* advantages on the sum you invest in the account, in addition to offering retirement savings.
Benefits and Features of Public Provident Fund (PPF)
Listed below are the benefits and features of the Public Provident Fund:
- It's a risk-free plan for investing and earning interest directly from the investment.
- The rate of interest in a person's investment is compounded.
- The 1961 Income Tax* Act (Section 80C) allows for a tax* deduction.
- Loans and advances against your Public Provident Fund balance.
- The investment is as little as ₹500.
- A partial withdrawal capability is offered to begin from the seventh fiscal year.
- Any Indian national with a proper residential address or domicile in the nation is qualified to create a PPF account, in addition to having an individual GPF account.
- The PPF account can be created at a public sector bank, a post office, or any other government-approved financial institution.
GPF vs PPF: The Differences
At this point, it is critical to grasp how PPF and GPF vary from each other. The following table highlights the key aspects of the comparison. GPF vs PPF, here we go!
Parameters |
GPF |
PPF |
Who is eligible to invest? |
This programme is only available to government workers who started their careers before 1 January 2004. |
This plan is open to any Indian citizen possessing domicile credentials. |
How much investment may be made? |
Worker Contribution - 6 per cent of the entire emoluments and salary. Government contribution - 6 per cent. |
Minimum amount - ₹500 Maximum amount - ₹1.5 Lakh Up to 12 instalments may be deposited each year. |
What's the present rate of interest? |
7.1% |
7.1% |
Any available loan options? |
General Provident Fund advances are available to employees throughout their careers. There is no upper or lower limit in this case. |
Loans are accessible between the third and sixth fiscal years, up to a maximum of 25 per cent of the entire deposit. |
What's the maturity tenure? |
The fund matures at the time of the government worker's retirement or superannuation. |
The fund will reach the maturity stage in 15 years. It may, however, be extended for another five years. |
Is it tax*-effective? |
GPF withdrawals are tax*-exempt, but initial donations aren't. |
Section 80C of the 1961 Income Tax* Act exempts the interest earned, donations made and final withdrawals. |
Conclusion
Online platforms may be of great assistance if you want to compare every saving scheme and decide which one to lay your money in. They not only aid you with their time-tested tactics but also ensure that you properly understand all of your alternatives before making a well-informed and well-researched conclusion.
Schemes such as the General Provident Fund and Public Provident Fund help people cultivate the habit of saving. Furthermore, these strategies ensure that their immediate financial demands are addressed without the need for pricey bank loans. As a result, it is not surprising that savings programmes are among the most sought-after and heavily invested schemes now managed by the Indian Government.
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L&C/Advt/2022/Aug/2003