The EPF scheme (EPF full form – employee provident fund) is a mandatory scheme for corporates that fulfils the eligibility criteria specified in the Employees Provident Fund & Miscellaneous Provisions Act, 1952.
Under the EPF pension scheme, both the employer and employee contribute to the EPF Account. The contribution is done at 12% of the salary including dearness allowance.
Along with the EPF scheme, the EPS scheme is also offered to employees. EPS eps full form is Employee Pension Scheme and it is offered to employees whose basic salary plus dearness allowance is up to Rs.15, 000. Under the EPS scheme, the employer contributes to the scheme, not the employee.
Of the 12% of the employer’s contribution, 8.33% of the salary is directed to the EPS account and 3.67% of the salary is directed to the EPF scheme. On the other hand, 12% of the employee’s contribution is directed solely to the EPF Account. Let’s understand the schemes in detail.
What is the EPF Scheme?
The Employees’ Provident Fund Scheme is a fixed income retirement benefits scheme that is available for employees in the corporate sector. The scheme builds up a retirement corpus through regular investments by both the employee and the employer. This retirement corpus can be availed after 58 years of age or if the employee is unemployed for 60 days or more.
Here are some of the features of the scheme –
- You can withdraw from the scheme after completing 5 years of service. This withdrawal is allowed for specific financial needs like buying a house, repaying the home loan, higher education, etc.
- EPF is an exempt, exempt, exempt scheme wherein the investments done, interest earned and the benefit received are all tax-free
- The scheme earns regular interest at a fixed rate. This interest is determined by the Government and is reviewed regularly
What is the EPS?
The Employee Pension Scheme is a scheme that pays pensions to employees. This scheme is available to employees who are members of the EPFO. Moreover, employees earning salaries up to Rs.15, 000 are eligible for the scheme. Under the scheme, the employer contributes 8.67% of the employee’s salary, up to Rs.1250, to the EPS account.
This account accumulates over the service period of the employee and then, when the employee retires, pension payment is done from the accumulated balance. The features of the scheme are as follows –
- Only-employer contributes to the Employee Pension Scheme EPS
- No interest income accumulates on the scheme
- Pension is payable after the employee attains 58 years of age. The early pension can also be availed after 50 years of age
- Lump-sum withdrawal can be done in less than 10 years of service has been completed or if the member has attained 50 years of age
- Pension is paid throughout the employee’s lifetime. On the death of the employee, the pension continues to be paid to the nominee
- The amount of pension which would be paid is calculated using the following formula –
(Average salary over the last 12 months of service * pensionable service) / 70
Pensionable service is the number of years worked by the employee
EPS vs EPF - Difference Between EPS and EPF
Both the EPF and EPS schemes are different. There are a lot of differences between EPF and EPS schemes. Let’s have a look –
| Point of difference | EPF | EPS |
| Contribution to the scheme | An employee contributes 12% of the salary + dearness allowance The employer contributes 3.67% of the salary + dearness allowance | An employee contributes nothing. The employer contributes 8.33% of the salary + dearness allowance |
| Contribution limit | There is no absolute limit. The limit is expressed as a percentage of the salary + dearness allowance | The contribution is limited to Rs.1250 per month |
| Applicability | EPF is available for all employees | EPS is available for employees whose salary + dearness allowance is within Rs.15,000 |
| Withdrawal from the account | Employees can withdraw from the EPF scheme anytime. If the amount is withdrawn before the completion of 5 years of service, the withdrawn amount is taxable. However, if the employee is unemployed for a continuous period of 60 days, the EPF balance can be completely withdrawn | Early lump sum withdrawal can be done if less than 10 years of service has been completed or if the member has attained 58 years of age, whichever is earlier. For receiving early pensions, the employee should have completed 50 years of age. |
| Benefit payable | The lump-sum benefit is payable after retirement after reaching 58 years of age or if the employee is unemployed for a continuous period of 60 days | Regular pension is paid when the employee attains 58 years of age. On the death of the employee, the pension continues to be paid to the nominee |
| Interest | A fixed rate of interest is paid on the balance on the EPF Account. The rate is reviewed and fixed by the Government every quarter. The current rate of interest is 8.15% per annum | No interest is declared on the EPS account |
| Tax benefit | The amount invested returns earned and the amount redeemed are all completely exempted from tax | Since employees do not contribute to the EPS, they do not get any tax benefits on investments. Lump-sum withdrawal is taxable. Moreover, the pension paid under the scheme is also taxable |
So, the EPF and EPS schemes are both employee welfare schemes that are, however, different from one another. Understand the difference between EPF and EPS if you are a salaried employee to understand the benefits which you are eligible for under these schemes.
While the EPF scheme would give you a lump sum retirement benefit, the EPS scheme would give you lifelong income. Both these schemes are, therefore, beneficial for the retirement planning of employees and help them create savings for their retirement.
FAQs
The Difference Between EPF and EPS is, EPF is a plan in which both the company and the employee pay a portion of the employee's wage. EPS, on the other hand, is exclusively contributed to by an employer. 12% of the employee's dearness allowance and salary.
What is the difference of EPF and EPS? ›
EPF requires contributions from employer and employee, while EPS pays pension to members without contribution. EPF is withdrawable after retirement, while premature withdrawal is allowed in EPS under specific conditions. Transferable EPF account via UAN. EPF tax-exempt up to certain limit, EPS requires tax.
What is EPF and eps nomination? ›
However, the difference between EPF and EPS nomination is that in the case of EPF amount, the nominee will receive the lump sum PF contribution amount after the member's death, however in the case of EPS, the nominee will get the pension after the member's death.
Can I withdraw EPF and EPS together? ›
Under Employee Provident Fund Act 1952, you can withdraw the full PF amount if you retire from your service after having attained the age of 58 years and you can also claim the EPS amount (Employees' Pension Scheme amount) at the same time.
What is the difference between PF and EPF? ›
PF is the popular name for EPF or Employees' Provident Fund. It is a government-established savings scheme for employees of the organised sector. The EPF interest rate is declared every year by the EPFO (Employees Provident Fund Organisation) which is a statutory body under the Employees' Provident Fund Act, 1956.
How much pension will I get from EPS? ›
Calculation of pension if the individual has joined before 16 November 1995:
| Number of years of service (years) | Pension Amount (In case the salary is Rs.2,500 or less) | Pension Amount (In case the salary is more than Rs.2,500) |
|---|
| 10 | Rs.80 | Rs.85 |
| 11-15 | Rs.95 | Rs.105 |
| 15-20 | Rs.120 | Rs.135 |
| More than 20 | Rs.150 | Rs.170 |
An Employee Provident Fund is a scheme that has been put in place for all salaried employees working in a corporate organization with 20 or more employees. The Employee Provident Fund Organization of India or EPFO has instructed all organizations to put a fraction of employees' salaries into the provident fund.
Why is EPF nomination important? ›
EPF nomination acts as a financial safety net for your dependents, offering them a sense of security in the case of your untimely demise. By nominating your family members or dependents, you allow them to access the funds seamlessly, thereby providing crucial financial support during challenging times.
What is the minimum pension in EPF? ›
Since September 1, 2014, the Government has been providing a minimum pension of ₹1000 per month to pensioners under the Employees' Pension Scheme (EPS), 1995. The EPS, 1995 operates as a 'Defined Contribution-Defined Benefit' Social Security Scheme.
How much total amount of share in EPF nomination? ›
Step 8: Add your nominee(s). Step 9: You can then declare the share for each nominee in percentage by clicking the 'Nomination Details' option. The total percentage should come up to 100%.
A. The EPS pension amount is also transferred along with the EPF corpus into the new account when applied for the transfer. The amount in the passbook shows zero but it is mentioned in the regional EPF office's database.
Can I keep money in EPF after retirement? ›
Your EPF membership will continue, as the employer's portion is paid only after age 58. You can however withdraw 90% of your entire EPF amount after the age of 57. As per the norm, the employee contributes 12% of the basic pay plus Dearness Allowance, to the PF account.
What is the limit of EPF and EPS? ›
Of the employer's 12% contribution, 8.33% goes to the Employees' Pension Scheme (EPS) and 3.67% to the EPF. However, the 8.33% EPS contribution is capped at the maximum amount of Rs.15,000 even when the employee draws a higher salary.
How is EPF different from EPS? ›
The major difference between EPF and EPS as saving schemes is that in EPF, both the employer and employee contribute a part of the employee's salary, whereas in EPS, only the employer contributes and the employee does not.
What are the disadvantages of EPF? ›
Lack of Liquidity: EPF is a long-term savings instrument, and premature withdrawals may be restricted or subject to penalties. This lack of liquidity can be a disadvantage in urgent financial situations.
How long will I get interest on EPF after leaving job? ›
Even after leaving the establishment a person can continue his membership. However, if no contribution is received into a PF account for 3 consecutive years the account shall not earn any interest after 3 years from the stopping of contribution.
What is the benefit of EPS? ›
This scheme aims to help employees in the organised sector, providing a pension post-retirement at 58. To avail benefits, an employee must have completed at least 10 years of service. Both existing and new EPF members are eligible for EPS scheme.
How is PF and EPS calculated? ›
Formula to Calculate EPF Amount
- Employee basic salary + dearness allowance = Rs 14,000.
- Employee contribution towards the EPF = 12% * 14,000 = Rs 1,680.
- Employer contribution towards the EPF = 3.67% * 14,000 = Rs 514.
- Employer contribution towards EPS = 8.33% * 14,000 = Rs 1,166.
The Employees' Provident Fund Organisation (EPFO) has announced the interest rate for the financial year 2023-24, setting it at 8.25%, up from the previous year's rate of 8.15%. This decision impacts millions of EPF members across the country.
What is EE, EPS, and Er in EPF? ›
In PF both the employees and employer's contributions get deposited. EE stands for Employee Contribution in EPF (Employee Provident Fund) and ER stands for Employer Contribution in EPF. So EE refers to the amount that the Employee contributes and ER refers to the amount that the employer contributes.
