EPF vs EPS 2025 - Comparison of Provident Fund & Pension Scheme

Comparisons Between EPF & EPS

Given in the table below are the basic differences between EPF and EPS

Both the EPF and EPS come with many benefits and hence are regarded as the most popular long-term savings schemes in India. Introduced by the Indian government and designed for salaried employees, both give guaranteed returns on investments.

What is an EPF account & how does it work?

A retirement benefits scheme that is handled by the Employees' Provident Fund Organisation (EPFO) and helps individuals save a decent amount of money is the EPF scheme. The employee and the employer each contribute 12% of the employee's basic salary and Dearness Allowance (DA) towards the scheme. While the entire contribution of the employee goes towards EPF, only 3.67% of the employer's share goes towards EPF, while the remaining is contributed towards EPS.

Employees are allowed to withdraw a part of the EPF money that is available under certain conditions, while the full amount can be withdrawn post-retirement or if they are unemployed for 2 months or more. The EPF amount that is available can also be transferred from one account to another in case employees change jobs. The EPFO has allotted a Universal Account Number (UAN) to every member who is contributing towards the scheme. The UAN will remain the same throughout the employment life of the individual and various EPF details can be accessed with the help of the UAN.

Conditions to Fulfil EPF Withdrawal Eligibility

The following are the eligibility conditions for availing the EPF withdrawal benefits:

1. An amount 90% of the total EPF corpus can be withdrawal a year before retirement
2. Total corpus can be withdrawn post-retirement

1. Member can request for withdrawal approval from employer online if they link their UAN and Aadhar with EPF account
2. Withdrawal is possible if the UAN is active; bank details are linked with UAN; and Aadhar and PAN linked to the EPF account
3. EPF withdrawal is allowed if the member suffers unemployment in case of retrenchment or lockdown in the country

Note: Early retirement age considered by EPFO is 55 years, after which members can opt for EPF withdrawal.

Is it possible to withdraw EPF before maturity?

Yes, the EPF corpus can be withdrawn before maturity only under specific circumstances. Employees’ Provident Fund Organisation allows the member to withdraw 75% of corpus before maturity only after one month of exit from the job. The remaining 25% of the corpus can be further withdrawn two months after exit from the job. Withdrawal before completing five years will incur tax at the rate of 10% which will be deducted from the withdrawal amount.

Members can withdraw the EPF corpus if they are in urgent need of funds due to unemployment, education or marriage of children, repayment of loan, and others.

EPF interest rate and tax benefits

Currently, the rate of interest offered by the scheme is 8.25% p.a. The EPF interest rates are reviewed on a yearly basis by the EPFO's Central Board of Trustees after consulting the Ministry of Finance. Under Section 80C of the Income Tax Act, 1961, tax benefits of up to Rs.1.5 lakh are provided for EPF contributions. The interest that is generated is also not taxable.

Benefits of EPF

The main benefits of investing in the EPF scheme are mentioned below:

1. Helps in saving a decent amount of money over the long-run.
2. Helps in funding retirement as well as post-retirement lifestyle.
3. No lump-sum investment is needed. A monthly deduction in the salary amount helps in saving a large amount of money over the long-run.
4. Tax benefits are provided for the amount that has been contributed as well as the tax that has been generated.
5. The EPF amount acts as a financial back-up in case of emergencies.

Calculation of EPF

Given below is an example of EPF calculation assuming that the basic salary and DA of the individual are Rs.25,000:

1. Basic Salary plus DA: Rs.25,000
2. Employee's contribution towards EPF (12% of Rs.25,000): Rs.3,000
3. Employer's contribution towards EPF (3.67% of Rs.25,000): Rs.917.50
4. Employer's contribution towards EPS (8.33% of Rs.25,000): Rs.2082.50
5. Employer's contribution towards EPF on Rs.15,000, which is the threshold income (3.67% of Rs.15,000): Rs.1249.50
6. Excess contribution that has been made by the employer (Rs.2082.50 - 1249.50): Rs.833
7. Total monthly contribution towards EPF (Rs.917.50 + Rs.833): Rs.Rs.1750.50
8. The total contribution made by the employee and employer per month: Rs.4,750.50, which is rounded off to Rs.Rs.4,750.

What is EPS and how does it work?

A scheme backed by the Government of India is the EPS. The nominees will also receive a pension under this scheme. The employer contributes 8.33% of the 12% share of the employee's basic salary and DA towards the scheme. However, the maximum amount that can be contributed towards the scheme is Rs.1,250. The maximum amount has been increased from Rs.541 to Rs.1,250. Initially, the maximum capped wage was Rs.6,500, but that has been increased to Rs.15,000.

Employees are not allowed to contribute to the pension scheme. The pension amount that is available can be checked on the EPFO portal with the help of the UAN. Employees will receive a pension once they have attained the age of 50 years and have completed 10 years of service.

Eligibility to avail pension benefits

The eligibility criteria in order to avail pension benefits are mentioned below:

1. The individual must be a member of the EPFO.
2. The individual must have completed at least 10 years of service.
3. The individual must have attained the age of 58 years.
4. In case individuals defer the pension period till they attain the age of 60 years, they will be eligible to receive the pension with an additional rate of 4%.

Benefits of EPS

The main benefits of contributing towards EPS are mentioned below:

1. Pension benefits are provided.
2. Lifelong pension is provided to the EPFO member. In case the member passes away, pension is provided to the family members.
3. Employees can withdraw the pension amount in full if they are unemployed for a duration of two months or more.

Calculation of EPS

The pension amount depends on the pensionable service and the pensionable salary of the member. The formula for the calculation of the pension amount per month is given below:

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

Given below is the calculation of EPS for an individual with a basic salary and DA of Rs.25,000.

1. Basic salary and DA of an employee: Rs.25,000
2. Employer's contribution made to EPS (8.33% of Rs.25,000): Rs.2,082.50

However, since the maximum amount of pension that can be contributed is Rs.1,250, the excess amount will be added to the EPF share of the employer.

Important points to know about EPS

Given below are some of the key points to know about the pension scheme:

1. Once the individual attains the age of 58 years, the employer does not have to make any contributions towards the scheme.
2. In case an employee joins a company after attaining the age of 50 years and is not contributing towards EPS, he/she will not have the option of contributing towards the scheme.
3. In case the employee is claiming a reduced pension and re-joins the company as an employee, the employer need not contribute towards pension.