Things You Need to Know About EPF and EPSThe Employees' Provident Fund (EPF) and the Employees' Pension Scheme (EPS) have provided immense benefits to a large number of salaried employees in India. However, before delving deeper into the world of EPF and EPS, it would be better to understand the key features of these schemes.
What Is EPF?Run by the Employees' Provident Fund Organisation (EPFO) in India, EPF is a retirement benefits scheme which functions as a saving platform for salaried employees. If you have more than 20 employees in your company, then you are legally required to register with EPFO. So, how does it work? The time from when you start working, 12% of your salary is deducted and added to your EPF account. Another 12% is contributed by your employer of which only 3.67% goes to your EPF account. The remaining 8.33% is diverted towards the Employees' Pension scheme or EPS. A yearly interest of 8-12% is provided on EPF, which is also tax-deductible under section 80(C) of the Income Tax Act.
What Is EPS?If you are a member of EPF, you automatically become a member of EPS. EPS offers a pension to salaried employees after their retirement. It is financed by diverting the employer's contribution of 8.33% towards EPS which earns zero interest.
How Much Pension Will You Get from EPS?Your pension amount is dependent upon your salary. To be eligible for EPS, employees should draw a minimum salary of Rs. 6500 (8.33% of which is Rs. 541 per month). Since 2014, the bar has been raised to Rs. 15,000 (8.33% of which is Rs. 1250 per month). If the salary is less than Rs. 6500, the central government itself contributes 1.16% of the employee's monthly wage to the EPS.
Can You Withdraw the Pension Contribution from EPF?Yes, you can. However, there are stringent eligibility conditions which you must be aware of before withdrawing any amount from EPF and EPS in India. These are: Withdrawing EPF + EPS (below ten years of service)- In this case, both EPF and EPS amount will be paid in total.
- Withdrawing EPF + EPS (above ten years of service)- Only the EPF amount will be paid. The EPS cannot be withdrawn. Instead, a scheme certificate is issued, after filling out Form 10(C). The pension will be paid after the person has completed 58 years of age.
- Withdrawing only EPF with a reduced pension- This entails full payment of EPF amount but with a reduced pension. The reduced ten too can only be paid if you have completed 10 years of service and are between 50-58 years of age. For this, form 10(D) will have to be submitted.
- Withdrawing only EPF with a full pension- The full EPF and EPS amount will be available only after you turn 58. For this too, form 10(D) will have to be filled.