Difference Between EPF and EPS
Most individuals get confused between EPF and EPS. Although both are pension schemes that the Government initiated to help salaried individuals save for their retirement, they have subtle differences.
This article will look at the difference between EPF and EPS.
First, however, individuals must learn about each scheme in detail.
What Is EPF and How Does It Work?
EPF (Employee Provident Fund) is a retirement savings scheme where both an employer and an employee contribute 12% of this fund's basic and dearness allowance (DA). It comprises a total contribution of 24%.
You can withdraw some part of this deposited amount before retirement. The total amount you can withdraw post-retirement.
When signing up for this scheme, you will get a UAN or a Universal Account Number that will remain with you until the end of your career. Then, when you transfer jobs, your UAN goes with you.
What is EPS and How Does It Work?
EPS is another pension scheme that the Government of India offers. It springs from the EPF, i.e., not all of an employer’s contribution goes towards an Employee Provident Fund. 8.33% of this amount goes to the Employee Pension Scheme or EPS. The rest becomes the actual EPF contribution.
The maximum amount one can contribute to this scheme is ₹1,250. Employees do not contribute to this scheme.
Now that you are aware of what each scheme entails, read on to understand the difference between EPF and EPS better.
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
Is the EPS or EPF account transferable?
Since you have an UAN, you can transfer between EPF and EPS accounts.
Who can be a nominee to an EPS account?
An EPS account holder can register one or more of his/her family members as the nominee.