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EPF (Employees' Provident Fund) and EPS (Employees' Pension Scheme) are key components of retirement planning in India, governed by the 1952 EPF Act. While EPF builds long-term savings, EPS ensures pension benefits post-retirement, offering financial stability to salaried employees.
EPF interest rate and tax benefits
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The EPF scheme currently offers an interest rate of 8.25% p.a., subject to annual review by the EPFO's Central Board of Trustees in consultation with the Ministry of Finance. Contributions to EPF qualify for tax deductions of up to Rs. 1.5 lakh under Section 80C of the Income Tax Act, 1961. Additionally, the interest earned on the EPF balance is tax-exempt.
What is an Employee Provident Fund (EPF)?
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The Employees' Pension Scheme (EPS), 1995 provides pension benefits to eligible EPFO members and their families.
Unlike EPF, EPS does not operate as an individual savings balance that earns annual interest. Pension entitlement is determined using the scheme's pension formula and depends principally on pensionable service and pensionable salary.
What are the main EPS features?
- No separate employee salary deduction is made specifically for EPS under the standard contribution structure.
- The employer's contribution is used to fund EPS, subject to the applicable rules.
- At least 10 years of eligible service is generally required for a monthly member pension.
- Normal pension generally begins at age 58.
- A reduced pension may be claimed from age 50, subject to the applicable conditions and reduction.
- Family pension provisions can apply after the member's death.
Who is eligible for EPF?
- Employees of any establishment covered under Employees' Provident Fund Organisation (EPFO) are eligible for this savings scheme
- Enrolment is mandatory for organisations with more than 20 employees
- It is mandatory for salaried employees earning Rs. 15,000 per month or above
Is it possible to withdraw EPF before maturity?
Members can withdraw their EPF balance after retirement. After one month of retirement, you can withdraw 75% of your EPF funds, and the remaining 25% can be withdrawn after two months.
However, you may be able to withdraw some EPF funds before retirement in specific situations, such as:
- Marriage or children's education
- Home loan repayment
- Unemployment
Note: Withdrawing EPF funds before 5 years of continuous service may result in a 10% tax deduction.
What is the Employee Pension Scheme (EPS)?
The Employees' Pension Scheme (EPS) provides financial support to retired members of the EPFO. Employees do not directly contribute to EPS, instead, 8.33% of your employer's EPF contribution is directed towards your pension. If an employee's passes away, their nominee continues to receive the pension benefits. You become eligible to start receiving your EPS pension after reaching the age of 58.
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Formula to calculate the monthly pension?
Monthly pension = (Average last 12 months salary x No. of years worked)/70
Is it possible to withdraw a lump-sum amount from EPS?
You can withdraw your EPS funds as a lump sum if either of these situations apply:
- You leave your job before completing 10 years of service.
- Upon reaching the age of 58.
What is a scheme certificate?
If you leave a job with less than 10 years of service and are under 58, you can opt for a scheme certificate. This certificate allows you to transfer your EPFO membership when starting a new job, ensuring your retirement benefits continue to grow. After completing a total of 10 years of service, you will receive the scheme certificate.
It is also helpful for family members to claim a family pension in the event of the member's death.
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Is EPF or EPS account transferable?
The Employees Provident Fund Organisation (EPFO) assigns each member a Universal Account Number (UAN). This UAN remains same throughout the employee's career, providing access to their EPF account details. When changing jobs, providing your UAN to the new employer ensures continuation of your EPF contributions.
Difference between EPF and EPS
The table below highlights the key distinctions between the Employees’ Provident Fund (EPF) and the Employees’ Pension Scheme (EPS):
| Feature | EPF | EPS |
| Employee Contribution | 12% of basic salary | Not applicable |
| Employer Contribution | 3.67% of basic salary | 8.33% of basic salary (subject to limits) |
| Contribution Limit | Based on a fixed percentage of salary | Capped at Rs. 1,250 per month |
| Age Criteria for Withdrawal | No age limit; withdrawal allowed after 60 days of unemployment or at retirement | Minimum 10 years of service and 50 years for early pension; 58 years for regular pension |
| Interest Rate | Interest earned is tax-free | No interest is paid on the contribution |
| Withdrawal of Funds | Full amount can be withdrawn at retirement or after 2 months of unemployment | Pension starts at 58 years of age |
| Early Withdrawal Rules | Entire EPF balance can be withdrawn under certain conditions | Withdrawal is permitted based on years of service |
Both EPF and EPS are government-backed schemes created for salaried employees. They offer secure and long-term financial growth, with EPF focusing on retirement savings and EPS providing pension benefits.
How EPS and EPF is calculated?
- Employee contribution: You are required to contribute 12% of your basic salary + DA to your EPF account.
- Employer contribution: Your employer matches your contribution with an additional 12%. However, the employer's contribution is further divided:
- 3.67% goes towards your EPF account
- 8.33% goes towards your EPS account
Let us understand this with an example
- Let say your basic salary is Rs. 12,000 and your DA is Rs. 3,000
- Total salary for EPF: Rs. 12,000 + Rs. 3,000 = Rs. 15,000
- Your contribution (12%): Rs. 15,000 * 0.12 = Rs. 1,800
- Employer's EPF Contribution (3.67%): Rs. 15,000 * 0.0367 = Rs. 550.50
- Employer's EPS Contribution (8.33%): Rs. 15,000 * 0.0833 = Rs. 1,249.50
Benefits of EPF
The Employees’ Provident Fund (EPF) is a government-backed savings scheme designed to help salaried employees build a secure retirement corpus. It not only promotes disciplined savings but also offers tax benefits and financial protection over the long term.
- Offers financial security after retirement through regular savings
- Both employee and employer contribute, helping the fund grow faster
- Interest earned and maturity amount are tax-exempt under specific conditions
- Partial withdrawals allowed for emergencies like medical needs or housing
- Safe and government-regulated, ensuring minimal risk
- Transferable across employers through the Universal Account Number (UAN) system.
Conclusion
Both EPF and EPS are designed to aid employees in achieving financial security in retirement. By understanding how each scheme functions, the contribution rules, and the benefits they offer, you can help yourself make informed decisions about your future.
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Frequently Asked Questions
Overview
Are EPS and EPF the same?
No, EPS (Employees’ Pension Scheme) and EPF (Employees’ Provident Fund) are different. EPF is focused on retirement savings, while EPS provides pension benefits. Both are funded through the employer’s contribution under the same scheme umbrella.
Can I withdraw an EPS amount?
Yes, you can withdraw from EPS if you leave your job before completing 10 years of service. If you complete 10 years, you're eligible for a pension after age 58, but cannot withdraw the corpus.
What is the difference between EPS and EPF?
EPF accumulates retirement savings with monthly contributions from both employer and employee. EPS, on the other hand, is entirely funded by the employer and provides a monthly pension after retirement, based on service years and salary.
Which is better – EPS or EPF?
EPF offers a lump sum amount upon retirement, while EPS provides a regular pension for life. Both schemes serve different purposes and can complement each other to strengthen your overall retirement planning and long-term financial security.
Can I have both EPF and EPS?
Yes, employees earning above Rs. 6,500 (now revised to Rs. 15,000) per month could choose to voluntarily enroll in both EPF and EPS. This allows them to benefit from a combination of retirement savings and lifelong pension income.
Can I withdraw both EPF and EPS?
Yes you can withdraw accumulations under both the Employees’ Provident Fund Scheme (EPF) and the Employees’ Pension Scheme (EPS), but the conditions differ. Under EPF you can withdraw your own contributions (and interest) when you leave employment or under other permitted circumstances. For EPS — which provides pension benefits — you can withdraw the EPS amount as a lump sum only if you have less than 10 years of service; once you complete 10 years you become eligible for a pension and cannot simply withdraw the EPS fund as a lump sum.
How do I check if I have EPF or EPS?
To check whether you are a member of EPF or EPS, log in to the Unified Member Portal of EPFO with your UAN. Under “View Passbook” or “Member e-Services” you should see your contribution record: if you see a “Pension Contribution” entry then you are part of EPS. If you only see provident fund contributions you may be covered only under EPF. Also checking your service history (which shows your wages, employer IDs, date of joining) helps confirm if your employer was contributing to EPS (which is generally for employees earning up to ₹15,000 basic + DA) or not.
How to move EPS to EPF?
Actually you cannot transfer the EPS accumulated amount into your EPF account as they serve different purposes: EPF is a defined-contribution savings account while EPS is a pension scheme based on years of service and last drawn salary. What happens on job change is that your EPF account (including employee + employer contributions to PF) gets transferred but only your service history under EPS moves — the EPS corpus stays with EPFO and you continue to be eligible for pension benefits if you meet the criteria.
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