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EPF vs EPS

The Central Government of India has been working tirelessly for its people to offer them with lucrative opportunities to invest in various government backed investment instruments in order to create a safe future for themselves. The Indian Government has time and again introduced multiple savings instruments that help individuals to save money and secure their future financially. These instruments launched by the government of India are focused to multiply the savings of people.

Among the top saving-cum-investment schemes introduced by the government of India, the Employee Provident Fund and Employee Pension Scheme are the two most popular instruments. The main reason for the popularity of these two schemes, namely the EPF and EPS, is that these schemes offer the opportunity to save, invest and multiply the hard-earned money of the Provident Fund account holder and thereby, help them in securing the golden years of their life. Both schemes, EPF and EPS, ensure subscribers get lucrative return on their investments. Both the schemes are designed pre-dominantly for the salaried employees. This article will throw light on the various facts of both the schemes. Read on to know more about Employee Provident Fund Scheme and Employee Pension Scheme introduced by the government of India.

Differences Between EPF vs EPS

There is some basic difference between both the saving-cum-investment schemes. The points of differentiation between EPF and EPS are as under:

Key Differentiation PointersEmployee Provident FundEmployee Pension Scheme
Contribution of the Employee12% towards the schemeNIL contribution towards the scheme
Contribution of the Employer3.67% towards the scheme8.33% towards the scheme
Minimum or Maximum limit on DepositAs stated above, the contribution towards the scheme is the deposit limit under this Scheme. The deposit limit is pre-determined by the EPFO. Under this scheme the employee contribution is NIL, whereas the maximum limit on deposit by employer towards EPS is restricted to Rs 1250.00
Age of WithdrawalCan withdraw the amount any time. however, if the amount is withdrawn before completion of 5 years of service then the received amount is taxableThere are certain age conditions pertaining to withdrawal of amount from EPS as under:
  • For early withdrawal the subscriber needs to complete minimum 10 years of service
  • For early pension the subscriber’s age must be 50 years
  • For regular pension the subscriber’s age must be 58 years
  • Interest RateCurrently, the accumulated corpus under this scheme earns interest @ 8.65% per annum. Kindly note, the interest rates are reviewed every year by the governmentThe accumulated corpus does not earn interest under this scheme.

    What is EPF?

    The Employee Provident Fund scheme is one of the retirement schemes introduced by the government of India. The scheme is designed to offer a good savings opportunity to the salaried individuals through perpetual contributions to their Provident Fund account. The scheme is designed in such a way that both, the employee and the employer contribute to the Employees Provident fund account.

    Both the Employees’ contribution and the Employer’s contribution to the EPF account is 12% of the basic salary + dearness allowance of the employee. Kindly note, out of the employers 12% contribution, only 3.67% is contributed to the EPF account, while the rest 8.33% is contributed to the Employee Pension Scheme. Thus, the total contribution towards Employee Provident Fund account is 12% of employees’ contribution + 3.67% of employers’ contribution. The accumulated corpus in the Provident Fund account is eligible to receive interest. The current rate of interest on PF contributions is 8.65%.

    The accumulated corpus across the years of employment can be withdrawn by the employee at times of financial crises, subject to fulfillment of certain conditions. This accumulated corpus acts as a retirement savings which can be utilized by the employee during post-retirement phase. This accumulated corpus is of great importance as it provides for financial security to the employees in times of financial emergencies. The contribution towards the EPF account helps the employee save decently for retirement.

    The account holders of the EPF account transfer the accumulated corpus from one PF account to another in case of change of jobs. For the contributions to the EPF account the Employee Provident Fund Organisation, the governing body of the EPF scheme, provides for Universal Account Number (UAN) to every subscriber of the Provident Fund. This UAN acts as the permanent account number for the PF account and remains same during the entire lifetime of the subscriber. With the help of the UAN, subscribers can access the entire details of their EPF account.

    All the contributions made towards the EPF account by the subscriber are eligible for deduction under Section 80C of the Income Tax Act, 1961. While there are certain terms and conditions on the withdrawal of the accumulated corpus from EPF account.

    Who Can Invest in EPF?

    As the name suggests, the Employee Provident Fund account can be opened by the employer on behalf of his / her employee. It is mandatory for the employer to open an employee provident fund account when he / she resumes working for the organisation. So, any salaried individual can invest in EPF through regular contributions in the account. The account cannot be opened by individuals at his / her will as it is opened by the employer.

    What is EPS?

    EPS stands for Employee Pension Scheme. This scheme is introduced to offer pension to the employees during the retirement phase. The scheme is designed in the manner that the employer contributes a certain percentage every month in the employees PF account which is directed as contribution towards pension scheme. Over the years, regular contributions create a corpus of money which is then paid back to the employees as a regular pension post their retirement. The contribution of 8.33 percent (of the basic salary + dearness allowance) to this scheme is done by the employer. However, the maximum deposit amount is capped at Rs. 1250.00 per month. In case, the EPS contribution is more than Rs. 1250, then the extra amount is deposited in the EPF account.

    Employees cannot contribute to this scheme. Similarly, no interest is accrued on the contribution made towards this scheme.

    Who Can Invest in EPS?

    EPS is a pension scheme introduced by the government of India for the financial security of the salaried individuals during their retirement days. Even though the EPS account is linked to the provident fund account of the employee, the contributions to this scheme can be done only by the employer. Thus, for any salaried employee only his / her employer can invest in EPS on his / her behalf. Kindly note, the regular pension to the subscriber starts once they attain 58 years of age, however, if the subscribers decides to avail the pension upon completing 60 years of age then in such case the pension is offered at an additional rate of 4 percent.

    FAQs on EPF vs EPS

    What is the difference between EPS and EPF?

    The Employee Pension Scheme and Employee Provident Fund, both schemes are introduced by the government of India for providing financial security during post-retirement phase. The Employee Provident Fund is the fund created to help employees secure their retirement life. Under the EPF, the employee contributes 12% of their basic salary and employer contributes 12% to the employees EPF account. But out of the employer’s contribution of 12%, 8.33% is diverted to Employee Pension Scheme, while the balance 3.67% is kept in the EPF account. The pension is paid through the contribution of the employers in the EPS account.

    Is EPF and EPS Number same?

    The Employee Pension Fund account number is the account in which the employees and employer’s contribution is collected. The EPS account is linked to your EPF account. So, there is no separate account number for the EPS account. If you want to access the details of your EPS account, you can login to your EPF account through UAN website. The UAN passbook shows their EPS contribution history.

    What happens to EPS when PF is transferred?

    In case you transfer your PF account, your EPF amount shall not reflect in your current passbook of PF account, however in your PF passbook the EPS columns shall reflect ‘ZERO’ addition. But your pension will get added to your PF account when the PF transfer process is complete. The pension amount to be credited to your account shall be as per the number of years you have contributed to the EPS.

    Can I withdraw my EPS amount?

    Yes, you can withdraw the contributed amount from EPS along with EPF. The condition for such withdrawal is that you must have furnished 10 years of service. When you withdraw EPF, you receive a corpus that consists of Employee contribution of EPF + Employer contribution of EPF + Interest earned on the accumulated EPF account + certain percentage of EPS contribution. Kindly note, the percentage of EPS contribution received is decided as per norms of Table D of Employee Pension Scheme. The contribution receivable along with EPF is subject to certain pre-determined percentage based on the completed years of service and salary drawn during the employment years.

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