As an employee, you are eligible for both the Employee Provident Fund (EPF) and the Employee Pension Scheme (EPS) in India. Read ahead to know their features and the differences between them.
The major difference between the EPS and the EPF is that both the employer and the employee contribute to the EPF while only the employer makes contributions to the EPS account.
But both of them are savings schemes initiated by the government for employees.
Employee Provident Fund (EPF)
Employee Pension Scheme (EPS)
The employee contributes 12% of their base salary every month
The employee doesn’t contribute anything
The employer contributes 3.67% of the employee’s salary every month
The employer contributes 8.33% of the employee’s salary every month
The employee must have completed 5 years of service to be able to withdraw prematurely (for the purpose of property purchase)
The employee must complete 10 years of service to be eligible for pension
Final settlement can be done after employee turns 55
Reduced pensions can be received after the age of 56. Person is eligible for a regular pension after turning 60.
Now that you know a little about EPS vs EPF, let us take a look at the EPF closely.
EPF stands for Employee Provident Fund and this scheme was launched under the Employees' Provident Funds and Miscellaneous Provisions Act, 1952.
Herein, the employer deducts a certain amount from your monthly salary and puts it in your EPF account, along with their contribution.
It comes under the Ministry of Labour and Employment, and is a compulsory scheme for all employers who employ more than 20 people. In some cases, organizations employing less than 20 people also have to be part of the scheme, depending on terms and conditions.
The major goal of this scheme was to inculcate a habit of a systematic contribution towards one’s retirement funds. Some other benefits are listed here -
12% of your basic pay is invested in the EPF account
The employer pays only 3.67% of the other 12% that they need to pay (the remaining 8.33% goes to the EPS account)
It helps to build your retirement corpus
It has certain tax exemptions that you can enjoy
If you change your job, the EPF account is transferable to your new employer
The employee can voluntarily make a bigger contribution every month
A percentage of the money can be withdrawn for buying property
90% of the total amount can be withdrawn if you are above the age of 54
Final settlement can be done once the employee reaches 55 years of age and completes 10 years of service
To be able to get a better answer to ‘EPS vs EPF’, take a look at the EPS in detail.
EPS stands for Employee Pension Scheme and was started by the EPF Organization in 1995. This scheme applies to everyone covered under the Miscellaneous Provisions Act, 1952.
Under this scheme, the employer contributes 8.33% of the employee’s base pay to the pension fund every month. This money is not deductible from the employee’s salary.
The benefits can be availed by an employee after the age of 58, if they have completed 10 years of service. The amount is given to the employee with some added interest every month, which depends on the age and the funds available in the EPS account.
The pension from the EPS can be availed post retirement at the age of 58, on the condition that contributions have been made for 10 years in the EPF account. There are other instances to avail this pension which are mentioned below -
The employee can avail the pension for the rest of their life in case of any permanent disability
The Widow Pension or the Vridha pension can be availed by the widow of a deceased EPF member
The children of the deceased EPFO member are eligible to receive the Child Pension till they turn 25 years of age. The amount is supposed to be 25% of the widow pension, and can cover up to 2 children
In case the deceased EPFO member does not have a surviving widow, the children are eligible for the Orphan Pension. Up to 2 children can receive 75% of the widow pension amount every month
An EPFO member who wishes to withdraw a reduced pension, can do so after they turn 56 years of age. They will get the payouts at the rate of 92% of the original amount
If you were searching for EPS vs EPF, you must have understood they are both interrelated. Both are part of the same scheme, and contributions to the EPF account are necessary to be able to reap the benefits of the Employee Pension Fund.
The major differences however lie in how and when they can be withdrawn. Also the contributions made by the employee and employer vary greatly from the EPF to EPS.
You must merge all your EPF accounts if you have changed jobs. At the time of requirement the total number of years will be calculated. You can do this very easily by yourself if your employer hasn’t already done it.
Once an EPF account has been created, you get your UAN or your Universal Account Number. You can use it to check your EPF passbook, where you can see the EPS contribution in the last column.
Whether you have to pay tax or not depends on how many years it has been since your account was opened. If you withdraw it within 5 years of opening the account, you will have to pay taxes depending on the amount you withdraw.
You might be looking for EPS vs EPF but they both come under the Employee Provident Fund Organization. If you do not make regular contributions to your EPF account, you will not be able to withdraw the EPS account when you retire.
Your EPF account will be made by your employee once you start working in the organization, you don’t have to do anything for it.
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