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Difference Between EPF and EPS

EPF vs EPS

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 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 scheme?

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 EPS scheme
  • 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

Both the EPF and EPS schemes are different. There are a lot of differences between EPF and EPS schemes. Let’s have a look –

Difference between EPS and EPF (EPF vs EPS)

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 8.50% 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 incomes. Both these schemes are, therefore, beneficial for the retirement planning of employees and help them create savings for their retirement.

FAQs on EPF vs EPS

Q1. What happens to the EPS when the PF is transferred?

In that case, your EPF amount will not reflect in your passbook of the account. 

Q2. Can I withdraw the EPS amount?

Yes, you can withdraw the money that was contributed.

Q3. What is the meaning of a scheme certificate?

If a member does exit from employment in less than a decade in service and he is below the age of 58, he can choose to get a scheme certificate to join another job and retain the PF membership. A scheme certificate is issued after 10 years of service. 

Q4. Can I get a lump sum from EPS?

You can withdraw a lumpsum amount in two cases, and they are:

– If the EPS member quits the job before 10 years.

– If the EPS member is over 58 years of age.

Q5. How can I calculate my monthly pension?

Your monthly pension = (Average last 12 months salary * Number of years worked)/70. This is the formula for calculating your pension.

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