Difference Between EPF and EPS

What Is EPF and How Does It Work?

What is EPS and How Does It Work?

An Overview on EPF vs EPS

 

Below are some key differences between the Employee Provident fund and Employee Pension Scheme.

Point of Difference

EPF (Employee Provident Fund)

EPS (Employee Pension Scheme)

Applicability

EPF applies to all organisations where the number of employees exceeds 20.

Employee Pension Scheme applies to those persons who are members of EPFO (Employee Provident Fund Organisation). Moreover, they contribute to the EPS account.

Eligible Employees

For salaried employees earning up to ₹15,000, it is compulsory. Moreover, employees with a salary of more than ₹15,000 can contribute voluntarily.

Employees whose salary + dearness allowance is up to ₹15,000.

Contribution of an Employee

The contribution of an employee is 12% of the employee's basic salary and dearness allowance

Nil

Contribution of an Employer

An employer also contributes 12%. However, only 3.67% of the employer's contribution goes to EPF. The rest is contributed to the Employee Pension Scheme.

8.33% of the basic salary and the dearness allowance.

Limitation on Contributions

The upper limit of the contribution is 12% of ₹15,000 per month.

The contribution is limited to 8.33% of the salary up to ₹15,000.

Minimum or Maximum Limit on Deposit

The contribution is fixed at 12% of the salary.

Same as above

Age of Withdrawal

You can withdraw after 58 years of age or if unemployed for a continuous period of more than 2 months.

You will receive the pension after 58 years of age.

Interest Rate

Interest rate is calculated every month and paid at the end of the financial year. The Government fixes the interest rate, and it is reviewed regularly.

There is no interest rate applied.

Withdrawal

Withdrawal from the account can take place after 58 years or if unemployed for two months.

Pension is received only after 58 years of age.

Premature Withdrawal

Partial withdrawal is allowed in certain cases like weddings, child's education, loan repayment, unemployment, etc. Moreover, the full EPF balance can be withdrawn.

An early pension can be received after 50 years of age. Moreover, you can withdraw a lump sum amount prematurely if you attain 58 years of age or if service is completed in less than ten years. Further, the amount which can be withdrawn depends on the years of service.

Financial Benefits

Full amount + interest can be withdrawn after retirement.

EPS pays lifelong pension. If the member dies, his nominee will be paid the pension.

Tax Benefit

Deduction of up to ₹1.5 lakh of employee contribution.

No tax deduction Is allowed as employee contribution is NIL.

Tax Applicable

The interest that you receive from EPF is tax-exempt. However, tax is payable on any contributions that are greater than ₹2.5 lakhs. If you withdraw the balance amount in EPF before 5 years, they will deduct a TDS at 10%.

When you receive the pension and the lump sum amount, it will be taxable.

To sum up the differences between EPF and EPS, EPF is a scheme where both an employer and an employee contribute part of the latter's salary. In contrast, only an employer contributes to EPS. We hope this article was of help to you!

Frequently Asked Questions