What is Provident Fund (PF)? EPF, PPF, GPF, VPF, NPS and Gratuity explained

In the article below the candidates will get to know all about Provident Fund, its benefits, its types and categories. Know in detail about Employee Provident Fund, Public Provident Fund, Gratuity, National Pension Scheme or NPS etc in detail here.
What is Provident Fund
What is Provident Fund

Post Retirement financial and social security is what any employee or working man seeks. It is the duty of the Government of the land to assure the citizen of the security and independence he/she may have after his /her retirement from the services to the country either in form of public or private jobs, or business. All in all the Government of the day grants the benefits to the citizens for their contribution to the economy in form of Provident Funds or PF.  Know  more about PF and its types, its categories, National Pension Scheme and Gratuity below. 

What is a Provident Fund?

Provident fund is a compulsory fund managed by the Government of a country for people to prepare them for their retirement. This scheme is used in many countries including India, Singapore and other developing nations. 

Provident fund which is maintained for the Government or service class employees is called Employee Provident Fund or EPF. The Provident Fund that is maintained by private individuals or business class is called Public Provident Fund or PPF. 

Employee Provident Fund (EPF):

  1. Any organization with more than 20 salaried members is required to pay Employee Provident Fund compulsorily.The employees or workers get 12% of their salaries deducted sent to an account managed by Employee Provident Fund Organization (EPFO).
  2. The employees also receive interests over this amount which may be 8 or 9% of the total revised every three months. 
  3. One can also partially withdraw from this account in case the employee needs it in time of medical emergencies or education emergencies etc. However this may be done after 5 years of depositing. 
  4. The account matures on an employee's retirement. This amount is also tax free after maturity. 
  5. One person can only have one account. The major benefit is that these accounts are free of debt liability. This means that in case of bad loans this amount cannot be even taken over by the banks. 

Public Provident Fund (PPF):

  1. This is an optional practice which can be performed by business men or non service class in India. This is an individual income account, with the only condition that this account can be held by a resident of India. 
  2. This account is not maintained in EPFO but in banks or Post offices as desired by the person maintaining it. It is however better to maintain these accounts in nationalised banks. 
  3. There is no % limit on a person depositing the PPF. It may range between INR 500-1.5 lakh per year. The returns he may get would have an interest amount of 7-8% added to his depositions. This is one percent less than EPF and the interest rates can be revised tri- monthly. 
  4. The maturity of this account is 15 years, that is the person depositing the PPF can withdraw anytime after 15 years of depositing the amount and partial withdrawal can be done after 5 years of initiation. 
  5. This account is also debt liability free and is tax free after maturity. 
  6. The account is individual in nature which means that only one person can hold one account. 

General Provident Fund (GPF):

In case any person employed in Government services wishes to deposit more than the limit of 12% of his salary, the Government gives him/her the provision of opening a General Provident Fund account or GPF. 

Voluntary Provident Fund (VPF):

In case a person employed in the private service sector wishes to deposit more than 12% or the limit on his salary in his PF account, such a type of account is called a Voluntary Provident Fund or VPF. 

National Pension Scheme (NPS):

Better than both EPF and GPF is the National Pension Scheme which can be opened and operated by any citizen of India between the age of 18-65 years. This may be done by him/her for obtaining social security. 

This scheme is optional and can be obtained by only the citizens of India. In this scheme the only issue is the withdrawal of the money deposited before 60 years or maturity. This is because the money is deposited in various other accounts like mutual funds or shares or bonds. Thus it is at a higher risk than EPF or PPF accounts. The debt liability in this account is also zero and it is also tax free after maturity. The return in this type of account is however higher than both EPF & PPF at 10%. 


This means bonus. This is done to acknowledge the loyalty of the employee. At the end of the year 15 days of salary is the minimum amount of gratuity that is given to the employee in form of salary. 

Also it can be calculated by the formula (Salary + DA) X 15X Tenure/ 26. 

Employees get gratuity under the Gratuity Act 1972 after they have worked for more than 5 years in any Government or Private company with more than 10 workers. 

So this was all about the Provident Fund scheme of the Government of India. 

Also read| GST on Petrol and Diesel: What will be the effect on fuel prices and economy?

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