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      Employees’ Pension Scheme (EPS): Eligibility, Calculation & Formula

      • 5 min read
      • Last Modified Date: January 30, 2023
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      The EPS can be used by any person who has worked with an EPF-registered organization for more than 10 years. Employees’ Pension Scheme (EPS) has been in existence since 1952 and is governed by the Employees’ Provident Fund Act of 1959. It is a pension scheme for employees working in Indian companies and their families. The EPS was introduced to provide financial security to employees in case they were unable to continue with their employment due to illness or death.

      The basic premise of the EPS is that employees contribute to it every month based on their monthly salary, along with the employers’ contribution. The employee’s contribution can be up to 10% of his salary, while the employer’s contribution can be up to 8% of its annual profits (these figures vary depending on what other deductions have been taken out).

      The employer and employee contributions are pooled together and invested in government-sponsored securities such as bonds. The interest earned is paid as pension benefits after retirement or death, depending on when it occurs. The EPS can be used by any person who has worked with an EPF-registered organization for more than 10 years. 

      Also read Post Office Investments – PPF, NSC, FD, RD, MIS, KVP, SSY.

      Every person who is covered under the EPF scheme is also automatically covered under the EPS scheme

      EPS is a defined benefit pension plan that provides retirement benefits to employees and also their families. It is an integral part of the Employees’ Pension Scheme (EPS), which is a social security benefit offered by the Government of India under the EPF Act, 1952.

      Eligibility for EPS: Eligibility criteria for receiving benefits under EPS are as follows:

      • You need to be employed in any organization registered with EPFO or its nominee as on 31 December each year;
      • You should have rendered at least six months of continuous service during the preceding financial year; * If you retired before 31 December 2014, you can claim at least one year’s service after such date to qualify for an old-age pension;

      You should be less than 58 years of age, and You should not have withdrawn any amount from your PF Account during the current financial year.

      EPS eligibility criteria are:

      • You must have worked for at least 10 years in an EPF-registered organization.
      • You must be between the age of 18 and 60 years.
      • You must be an Indian citizen or a person of Indian origin (PIO).
      • Your employer must be registered with EPF, which makes it mandatory for them to put their employees’ details on the system before enrolling them for EPS benefits. If your employer is not yet registered with EPF but has other similar schemes like provident fund, bonus, or gratuity, then they can also voluntarily opt for EPS by filing Form No 11 once they start working with you as an employee and meet all eligibility criteria mentioned above.

      You should be a regular employee and not on a contract or ad-hoc basis. Your employer should have a minimum of 20 employees for you to be eligible for EPS benefits. The company should be in business for at least 2 years by the time you join them as an employee. You must make your contribution at least once every year, which can be done either through deductions from your salary or by depositing money into your account via cheque or online transfer.

      How to use the formula (Calculation of EPS)

      The formula for calculating EPS is:

      • (Average monthly salary x Average years of service) x 12
      • EPS = (Average monthly salary x Average years of service) x 12

      The average monthly salary is the amount of money the employee earns each month. The average years of service are how long the employee has been working at his or her current company.

      If you have worked with an EPF-registered organization for more than 10 years, you will get a pension after retirement.

      You can withdraw your pension at the age of 60 years if you have worked in a registered organization for less than 10 years and are less than 60 years old. If you have worked for more than 10 years and are less than 60 years old, the pension withdrawal age is 58 years. The EPS is not taxable and there is no requirement for filing tax returns related to this scheme.

      EPS benefits

      Employees’ Pension Scheme (EPS) is a pension scheme offered by employers to employees in India. It provides financial protection to employees who opt for this scheme. If you are an employee, you may be interested in knowing about the benefits available under EPS.

      Here are some of the benefits of EPS:

      Retirement benefit: You can avail of a retirement benefit of up to Rs.1,50,000 per year at your retirement age of 60 years or more.

      Interest-free loan: You can get an interest-free loan of up to Rs.3 lakhs per year. The loan can be used for any purpose including buying a home or investing in shares or bonds.

      Pension Benefits under the Employees’ Pension Scheme (EPS)

      Pension on Retirement at the Age of 58 years

      The pension is paid at the age of 58 years and will be paid in the form of a lump sum payment. The amount of pension is calculated by multiplying the average basic salary per month by the average number of years worked for each year within the financial year. The minimum amount payable is Rs. 1,500/- for each month during service up to a maximum limit of Rs. 50/- per month. This amount is subject to an annual inflation adjustment factor provided by the Central Government as per their decision made about every financial year.

      Pension on leaving service before becoming eligible for Monthly Pension

      The pension is paid after becoming eligible for monthly pension under EPS and will continue to be paid until death or disability occurs, whichever occurs first. The amount of this pension depends upon the age at which retirement takes place and whether or not any disability has occurred during service. It also depends on whether or not any family member(s) are dependent upon him/her.


      You may choose to get your pension from the EPF or EPS, depending on your needs. The most important thing is to know both the schemes and how they work before making a decision. Either way, you will have the satisfaction of knowing that you have contributed towards helping build a better future for yourself and those around you.

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