Difference between EPF and EPS in India

Employee's Provident Fund (EPF) and Employee Pension Scheme (EPS) are framed under the Employee's Provident Fund & Miscellaneous Provisions Act, 1952. The schemes are administered by the central board of trustees that consist of representatives of government (both central and state), employers and employees.

What is an Employee Provident Fund (EPF)

The provident fund scheme promotes savings towards the retirement of an individual. The system provides that both the employer and the employee of an establishment contribute to the employee's provident fund account. The Contribution gets accumulated until the individual's entire working period, and the employee can withdraw a lump-sum amount with interest after retirement.

The scheme offers regular interest on investments made in the EPF account. For the financial year 2019-20, the interest rate offered on the EPF account is 8.5%. The employer and the employee's Contribution in the EPF account shall be at 12% of the employee's salary (basic salary and dearness allowance).

The EPF applies to whom?

This savings scheme applies to organisations' workforce under the Employees' Provident Fund Organisation (EPFO).
It is mandatory for such organisations where the number of employees exceeds 20.
It is compulsory for salaried employees earning up to Rs.15000 salary (basic + dearness allowance).
Employees with more than Rs.15,000 salary can contribute voluntarily.

Is it possible to withdraw EPF before maturity?

An EPF member can withdraw the balance amount in EPF only after retirement from a regular paying job. The 75% of the EPF corpus can be withdrawn after one month of exit from the job and the balance 25% after two months of leave.

However, the individual can apply for PF withdrawal before the maturity period only in exceptional cases like marriage or education of children, loan repayment, unemployment, etc.

If the EPF corpus amount is withdrawn before five years, then 10% tax is deducted.

What is the Employee Pension Scheme (EPS)?

The Pension scheme pays a pension to the employees who are members of EPFO and have contributed to the EPS account. On the death of an employee, an annuity continues to be paid to the nominee. Employee's don't contribute to the EPS account. The employer's contribution is 8.33% of the employee's salary (basic + dearness allowance). Pension from such scheme is received to the employee after the age of 58 years.

How 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?

A person is eligible to withdraw a lump sum amount of EPS, earlier of below two situations :

If the EPS member leaves the job before ten years of completion of service.
If the member has attained 58 years of age.

What is a Scheme Certificate?

If the member exits from employment with less than ten years in service when his age is less than 58 years, he can get a scheme certificate to join another job and retain the EPFO membership. The scheme certificate is issued to him after the completion of 10 years of service.

The scheme certificate can also be applied if the member withdraws EPF contribution and wants to receive pension benefits after 58 years. It is also helpful to claim a family member's pension on the eligible member's death.

Is EPF or EPS account transferable?

The members contributing to the scheme are allotted a Universal Account Number (UAN) by the Employees Provident Fund Organisation (EPFO). The UAN is the same throughout the member's employment life and can access all other relevant details. If the employee changes the job, he can continue contributing to the EPF account after updating his UAN number to the new employer. To transfer funds online, activate UAN and link aadhar and PAN with it.