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