EPF vs EPS : If you’re planning for retirement, the Employees’ Provident Fund (EPF) and the Employees’ Pension Scheme (EPS) are two of India’s most reliable schemes. Both schemes fall under the Employees’ Provident Funds and Miscellaneous Provisions Act, 1952, and provide working individuals with a secure way to save for retirement. EPF is a safe and disciplined way of long term savings, while EPS provides a means of regular income (pension) after retirement.
What is Employees Provident Fund (EPF)?
EPF (Employees’ Provident Fund) is only for those employees who work in companies registered with EPFO (Employees’ Provident Fund Organisation). If any company has more than 20 employees, then it is necessary for it to implement this scheme.
In this scheme, both the employee and the employer contribute 12% each of their salary (basic salary + dearness allowance).
Of the amount contributed by the employer, 3.67% goes to EPF and 8.33% to EPS.
EPF offers 8.25% interest for 2024-25, which is reviewed every year.
Contributions made to EPF are eligible for tax exemption up to Rs 1.5 lakh under Section 80C of the Income Tax Act. There is no tax on interest up to Rs 2.5 lakh per annum .However, withdrawal of EPF amount is tax-free only under certain conditions.
What is Employees’ Pension Scheme (EPS)?
EPS (Employees’ Pension Scheme) is a scheme to provide regular pension after retirement. In this, only the employer contributes, which is 8.33% of the salary. Under this scheme, the employee gets a monthly pension after serving for at least 10 years and attaining the age of 58 years. If the employee dies, the nominee continues to receive this pension.
Benefits from EPF and EPS
- EPF and EPS together offer dual benefits to salaried individuals:
- Safe and tax-saving savings with EPF.
- Fixed pension every month after retirement from EPS.