GPF(General Provident Fund) advantages

In continuation our discussion on various aspects, we will take the look at General provident fund popularly called as GPF in Govt circles which is available to all Govt employees including to these R &D organization.
GPF is a financial instrument which has all one could ask for
It has

1. High safety
2. High liquidity
3. High return
4. Tax advantage


If you compare the other savings option available outside , none of them whether PPF, NSC, bank deposit, ELSS, or anything you name it can match these benefits.

If you want high liquidity Option, you have to park your investment in savings bank account, liquid market instruments like liquid fund of MF etc, which will fetch small return and it will be eaten away by inflation.
Further if you want tax saving option, you have the option like PPF which has a lock in perid of 15 years or NSC has a lock in period of 6 years or if you opt for ELSS schemes Of any mutual fund it has lock in period of 3 years.
PPF public provident fund is also like GPF which is backed by govt and open to all comes with a lock in period of 15 years. Further it has the ceiling of maximum Rs. 70000 per annum and you cannot put any amount beyond that amount. You can withdraw 50 % of the balance from 7th year onwards. The big advantage of the PPF is the interest earned is fully exempt from tax under section 10(11) of IT Rules

NSC (national savings certificate) a favored option so far all salaried employees has lock in period of 6 years and interest earned is taxable.

The ELSS Scheme the new market flavour , is an option floated by many M.Fs. with a lock in period of 3 years In these schemes, the return is based on the movement of stock market. These are equity based scheme and carries high risk. But the mutual fund investment are subject to market risk and one fall in the market when you need money , you may lose your capital. Further all these schemes has entry load of 2.25% of your investment and you have to also bear the AMC cost, etc which will eat you return.

The bank FD Tax saver scheme which is of new origin has lock in period of 5 years and interest is subject to tax. Further you have to face the worry of TDS deduction by bank if your interest income exceed Rs. 5000 per annum.
Though the bank deposit scores on safety, you cannot forget the fiasco created by GLOBAL TRUST BANK which suddenly went bust.

So the market rule is if you want high liquidity then your return will be lower, high safety means your return will be lower. High return will carry high risk. Tax saving comes with lock-in period and your liquidity is squeezed.

GPF scores on all the points.

How we will discuss and discover

Part II Of " How good is Govt. Job?"

Read the first part of the article for continuity.


In our last article we saw the pay structure of private sector and the R& D institution of the Govt.

If you see in the pay slip of the employee of the company, there is a component of LTA(Leave travel allowance) for supporting the employee when they go on vacation as part of welfare measure . The allowable amount is divided in to monthly allowance and shown as a salary component. This system is also applicable in R& D institution also but they do not include as part of salary package and the amount is reimbursed to the employee on completion of vacation.
Similary take the case of medical allowance, medical insurance premium paid for the employee as health benefit is included in the pay roll to boost the pay . These R & D Institution also has got the heath centre/ dispensary facility with the doctors on their roll are available within the campuses for treatment. Further the patients are referred to hospitals and the expenditure is reimbursed or sometimes directly paid by these institution on behalf the employee. This expenses also not shown in the salary slips.
The companies include everything spent on employee whether canteen, medical etc and they monitise it and show as CTC. But the Govt insitution show only what they are paying , and other benefits does not get noticed.
If you see the typical recruitment advertisement for the post of for Engineer/Scientist it shows as scale of pay 8000-275-13500 and the note following the advertisement says in addtion you will be eligible for dearness pay, dearness allowance, CCA, House rent allowance etc. , medical facilites for self and family and so on .
Further these institution has causal leave, earned leave, half pay leave etc(these leaves are paid leave) which is not easily available in the private sector.

Then where is the problem. We must look in to the behavioural aspect of human being to look in to the problem.

We will discuss

Please post your comments to discuss and discover.

HOW GOOD IS GOVT JOB?

The hot topic today in any Govt R&D organization like DRDO/CSIR/ISRO are talent/manpower crunch of engineers/scientists and lot of young engineers are leaving these organizations to private sector thanks to the booming software industry. Govt institutions are finding it difficult to recruit 100 or 200 engineers whereas Infosys, TCS etc., announce recruitment of 10,000 engineers per year.

We will discuss the advantage and disvantage of the govt sector and the private sector to make the informed decision and main emphasis on such discussion will always start from the pay package. The main reasons cited for their leaving is pay packages offered by govt R&D organization are far below than what is offered by private sector. We will discuss each point one by one. Is it really true.

Let us take the case of pay package first.

We will take the case of a fresh recruit in any company like Infosys or TCS etc., and these companies offer a CTC (Cost to the Company) to an average of Rs.3.00 Lakhs P A and their typical pay slip is as follows :

Monthly Annually
Basic 5000 60000
HRA 2500 30000
Conveyance 800 9600
Medical 1000 12000
Special Allowance 6500 78000
CCA 750 9000
Meal Voucher 1000 12000
TOTAL (A) 17550 210600
EPF 600 7200
Gratuity 250 3000
Medical Insurance 750 9000
Performance linked
Bonus 6000 72000
TOTAL (B) 7600 91200
TOTAL (A+B) 25150 301800



CTC means cost to the company incurred by the company towards employee and companies counts every rupee spent on its employee. In the instant case, if you see the net salary received in hand as per “A” is Rs.17550 only and rest given towards PF, ESI, Medical Insurance etc., Further, the performance Linked Bonus is a is based on the performance and payable to the employee on roll when it is declared . No one is aware of his performance and if he resigns before he forfeits his entire amount.
we will will take the full amount in our case Rs.6000 and the total take home in that case will be Rs.17550 + Rs.6000 = Rs.23550. Hence one finally get s a take home of Rs.23550.


We will take an illustration of a fresh recruit in any R&D organization in a metro cirty. On joining the engineers salary will be as follows :

Monthly Annually
Basic Pay 8000 96000
DP 4000 48000
Dearness Allowance (41%) 4920 59020
HRA 30% 3600 43200
Transport Allowance 800 9600
CCA 300 3600
Professional update
allowance 416 5000
22036 264440

The final take home of engineer in govt R&D institution is Rs.22036. and if you compare it what they get in private sector both are on par.

Further these R&D institutions have the campuses along with the Offices and staying in the campus is a great advantage and these institution have the facility of 100% accomodation for engineers. Further these campuses are very vast and act like a gated community with security and greenery. In such a scenario, it is a five minute walk to the office and spending quality time in office and family with full of energy .
In contrast compare the situation in any software industry in any metro ,like bangalore where most of them are located on the outskirts of city and one has to commute hours to reach them because of traffic and typically a employee spends 3 to 4 hrs in traffic before reaching office . This is the situation software companies want to avoid wherin their employees are tired before reaching the office.

You can see from the above that there is no diference between the two and and in some factors govt job is more preferable. We will also see the PF, Medical etc.

Then where is the problem and govt R&D institution are not able to attract people.

We will discuss

Please post your comments to discuss and discover.

dear all,
i am chidambaram and have created this blog for discussion and debate of subject of mutual interst. i hope this blog will enable us to discover new interesting areas and benefit us.