EPF vs EPS – Key differences explained

The Employees’ Provident Fund (EPF) and Employees’ Pension Scheme (EPS) are two helpful retirement planning schemes that you can use if you are preparing for your golden years. Both these schemes are backed by the Government of India, making them a good addition to your retirement portfolio.  

EPF vs EPS: Which one is better? Let’s find out their differences so you can make an informed choice. 

Meaning

EPF: 

EPF is a fixed-income retirement savings scheme designed for salaried employees. The interest rates are reviewed at the end of each financial year, with the rate for 2024-2025 set at 8.25%. Under the EPF scheme, both the employer and the employee contribute to the employee’s EPF account, and the balance grows with accrued interest. 

You can withdraw 100% of your EPF account balance upon retirement. Withdrawals up to 75% of the balance are allowed if you are unemployed for at least one month. You can withdraw the remaining 25% if the unemployment continues for two months or more. Additionally, the account permits partial withdrawals under certain conditions.

EPS: - 

EPS is a retirement benefit scheme designed to offer financial support to employees in organised sectors after retirement or permanent disability. The scheme provides a monthly pension to eligible employees.

Unlike the EPF, employees do not contribute directly to their EPS account. Instead, the employer allocates a certain percentage of the employee’s basic salary and Dearness Allowance (DA) towards the scheme. This is part of the Employer’s PF contribution.

Eligibility criteria  

EPF: 

• You must be working in an organisation with 20 or more employees, covered under the Employees’ Provident Fund Organisation (EPFO).
• Contributing to EPF is mandatory if you are a salaried employee earning up to ₹15,000 per month (basic salary plus DA). Otherwise, it is optional. 
• You must have an active Universal Account Number (UAN), and your bank details should be linked to it.

EPS:

• You must be working in an organisation covered under the EPFO.
• You must have a minimum service of 10 years to qualify for an EPS pension.
• You must be at least 58 years old to avail of regular pension benefits or at least 50 years old for an early pension.  

Contribution structure 

EPF: 

The employee contributes 12% of their basic salary and DA to their EPF account. This amount is directly deducted from their salary. Alongside this, the employer contributes 3.67% of the employee’s basic salary and DA to the EPF account.

EPS: 

The EPS does not require any contribution from the employee. The employer, however, contributes 8.33% of the employee’s basic salary and DA to the EPS account. This contribution is capped at ₹1,250 per month.

The combined contribution from the employer under both schemes is 12% of the employee’s basic salary and DA. 

Benefits 

EPF: 

• Tax savings: EPF contributions, interest earned, and withdrawals are tax-free, subject to certain conditions. This ensures better tax savings and enhanced returns.
• Shared contribution: Both the employee and employer contribute to the EPF, which helps lower your financial burden.
• Transparency and governance: Managed by a statutory body, the EPF ensures transparency and provides a streamlined grievance redressal mechanism in case of any issues. 
• Long-term savings: EPF encourages retirement savings from a young age, providing financial security during retirement.
• Partial withdrawals: The scheme allows partial withdrawals in certain cases, offering financial support during difficult times.
• Portability: The EPF is linked to a uniform UAN, which helps you transfer your EPF balance from one employer to another when switching jobs.

EPS: 

• Retirement pension: EPS provides you with a regular pension after retirement, helping you stay financially secure in your later years.
• Employer contribution: The contribution responsibility lies entirely with the employer, with no deductions from your salary.
• Early withdrawal: You can make an early lump sum withdrawal if you have completed less than 10 years of service, which can be helpful during emergencies.
• Early pension: If you have completed 50 years of age, you can opt for an early pension, though at a reduced rate.
• Enhanced pension on delaying: If you refrain from withdrawing the money for two more years beyond the standard retirement age of 58, the accumulated corpus may result in a higher pension amount. The pension is increased by 4% for each year of delay.
• Nominee benefits: In the event of your unfortunate demise, your nominee will receive a pension. This provides financial support to your family in your absence.

Tax implications 

EPF: 

• You can claim tax deductions on employee contributions up to ₹1.5 lakh annually. 
• Your employer’s contributions beyond ₹7.5 lakh annually will be fully taxable. 
• Interest earned on employee contributions exceeding ₹2.5 lakh in a year is taxable.
• If you withdraw your EPF balance before completing five years of continuous service, the amount withdrawn will be subject to tax, except in specific cases such as ill health. Tax Deducted at Source (TDS) also applies in certain cases. 

EPS: 

• Both the pension and lump-sum amount are taxable when received.

Balance check  

Here’s how you can check your balances: 

EPF:

 Using EPFO Portal 

• Visit the EPFO Portal.
• Click on ‘For Employees’ > ‘Member Passbook’.
• Log in with your UAN, password, and CAPTCHA.
• Enter the One-Time Password (OTP) sent to your Aadhaar-linked phone.
• View your PF balance.

Using UMANG App 

• Download and log in to the UMANG app.
• Go to ‘Services’ > ‘Social Security’ > ‘EPFO’ > ‘View Passbook’.
• Enter UAN and OTP, then view or download your passbook.

Missed Call/SMS

• Give a missed call to 9966044425.
• Send an SMS - EPFOHO UAN to 7738299899.

EPS:

• Visit the EPFO Website.
• Click ‘For Employees’ > ‘Member Passbook’.
• Log in with your UAN and view pension contribution details.

Conclusion

Both EPF and EPS contribute to securing your retirement. While EPF offers a fixed interest, EPS provides a regular pension. Understanding their differences can help you make informed choices for a peaceful retired life.