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    EPF vs EPS

    • 5 min read
    • Last Modified Date: January 22, 2024
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    The Government of India has created several investments and savings initiatives to assist citizens in saving money for the future. The Employees’ Provident Fund (EPF) and the Employees’ Pension Scheme (EPS) are two prominent systems (EPS). The primary goal of both plans is to assist individuals in saving money for retirement. Both plans are intended for paid persons and offer guaranteed returns.

    EPF Vs EPS: A Comparison

    Features EPF EPS
    Employee Contribution 12% Nil
    Employer Contribution 3.67% 8.33%
    Deposit Limit Predetermined, fixed-rate Maximum- Rs.1,250
    Age Limit for withdrawal Not required
    • Min. service- 10 years
    • Max. service-50 years of age for early pension.
    • 58 years of age for a regular pension.
    Interest Rate Interest received on EPF is exempted No interest rate applied
    Withdrawal of funds After 58 years of age or if unemployed for 60 days or longer Pension is received after 58 years of age.
    Premature Withdrawal amount A complete EPF balance can be withdrawn The amount can be withdrawn based on the total years of service.

    EPF and EPS provide several benefits and are hence considered the most widely popular savings programs in India. Both have been instituted by the Indian government and are intended for salaried personnel. They provide assured investment returns.

    EPF account Is?

    The EPF program is a retirement benefits scheme managed by the Employees’ Provident Fund Organisation (EPFO) that assists individuals in saving a reasonable amount of money. Each employee and employer contribute 12% of their base salary and Dearness Allowance (DA) to the plan. While the employee’s whole contribution goes to EPF, only 3.67% of the employer’s part goes to EPF, with the remainder going to EPS.

    Employees can take a portion of their EPF money under specific situations, while the entire amount can be withdrawn after retiring or if they are jobless for two months or longer. If an employee changes employment, the available EPF amount can be moved from one account to another. Every member who contributes to the system has been assigned a Universal Account Number (UAN) by the EPFO. The UAN will stay unchanged throughout the individual’s job tenure, and the UAN may be used to access different EPF information.

    Do not miss EPF – Employees’ Provident Fund, EPFO Benefits & Process.

    Interest Rate for EFP

    The plan now offers an interest rate of 8.1% per annum. The EPFO’s Central Board of Trustees reviews the EPF interest rates every year after consultation with the Ministry of Finance. Tax advantages of up to Rs.1.5 lakh are granted for EPF contributions under Section 80C of the Income Tax Act, 1961. The produced interest is likewise not taxed.

    EPF Advantages

    • Help you save a significant amount of money in the long term.
    • Aids in the finance of retirement and post-retirement living.
    • There is no requirement for a one-time investment. A monthly salary deduction helps you save a significant amount of money in the long term.
    • Tax breaks are available for both the amount contributed and the amount of tax earned.
    • In the event of an emergency, the EPF amount serves as a financial backup.

    How To Calculate EPF?

    • Rs.25,000 basic salary + DA
    • Employee EPF contribution (12% of Rs.25,000): Rs.3,000
    • Employer EPF contribution (3.67% of Rs.25,000): Rs.917.50
    • Employer’s EPS contribution (8.33% of Rs.25,000): Rs.2082.50
    • Employer payment to EPF on the threshold income of Rs.15,000 (3.67% of Rs.15,000): Rs.1249.50
    • The excess contribution paid by the employer (Rs.2082.50 – 1249.50): Rs.833
    • Total monthly EPF contribution (Rs.917.50 + Rs.833): Rs.1750.50
    • The total monthly contribution given by the employee and the employer is Rs.4,750.50, which is rounded off to Rs.4,750.

    Given below is an example of EPF calculation assuming that the individual’s base pay and DA are both Rs.25,000:

    EPS Is?

    The EPS is an initiative supported by the Government of India. This arrangement would also provide a pension to the candidates. The company contributes 8.33% of the employee’s 12% basic salary and DA to the plan. The highest amount that may be contributed to the plan, however, is Rs.1,250. The maximum sum has been raised from Rs.541 to Rs.1,250. The highest capped wage was initially Rs.6,500, but it has now been raised to Rs.15,000.

    Employees are not permitted to invest in the pension plan. The UAN may be used to check the available pension amount on the EPFO site. Employees will be eligible for a pension when they reach the age of 50 and have served for ten years.

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

    EPS Eligibility?

    • The individual must be an EPFO member.
    • The individual must have served for at least ten years.
    • The individual must be at least 58 years old.
    • Individuals who postpone their pension period until they reach the age of 60 will be entitled to a 4% increase.

     The Advantages of EPS?

    • Pension benefits are available.
    • EPFO members are entitled to a lifetime pension. If a member dies, his or her family members are entitled to a pension.
    • Employees who have been jobless for two months or more can withdraw the entire pension sum.

    How To Calculate EPS?

    The pension amount is determined by the member’s pensionable service and pensionable salary. The formula for calculating the monthly pension amount is as follows:

    (Pensionable Service x Pensionable Salary)/70 = Monthly Pension

    The EPS calculation for a person with a basic salary and DA of Rs.25,000 is shown below.

    Employee’s basic salary and DA: Rs.25,000

    Employer contribution to EPS: Rs.2,082.50 (8.33% of Rs.25,000)

    However, because the maximum amount of pension that may be donated is Rs.1,250, any surplus money would be added to the employer’s EPF contribution.

    EPS: Crucial Info

    • The employer is not required to contribute to the program after the person reaches the age of 58.
    • If an employee joins a firm after reaching the age of 50 and is not contributing to EPS, he or she will be unable to participate in the program.
    • If an employee with a reduced pension re-joins the firm as an employee, the employer is not required to pay the pension.

    Conclusion

    The Employees’ Provident Fund (EPF) and the Employees’ Pension Scheme (EPS) are two prominent systems (EPS) that assist individuals in saving money for retirement. These plans offer guaranteed returns.

    But do you know what is an even better investment than EPF and EPS? Real estate. Real estate provides long-term stability, guaranteed returns, capital appreciation, and substantial rewards. Assetmonk is a solid investing platform in India that offers a one-stop shop for all of your real estate assets via fractional ownership. Don’t hold off investing for a better future!

    EPF vs EPS FAQs

    What is the difference between EPS and EPF?

    EPF is a plan in which both the employer and the employee contribute a portion of the employee’s pay. EPS, on the other hand, is exclusively contributed to by an employer.

    Can I withdraw both EPF and EPS?

    According to the Employee Provident Fund Act of 1952, if you resign from your work beyond the age of 58, you can withdraw the entire PF money and also collect the EPS (Employees’ Pension Scheme) amount at the same time.

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