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What is the difference between EPF vs EPS?  



What is the difference between EPF and EPS. When I check EPF passbook I can see that employer contribution is divided in EPF and EPS and employee (myself) contribution goes to EPF Account.

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Both Employee Pension Schemes and Employee Provident Fund are benefits offered the government of India to enable employees to give security during their retirement days. EPF (Employee Provident Fund) Scheme enables your employer and to contribute basic salary upto 12% each per month towards your EPF account. Therefore, the total sum of 24% of basic salary is contributed towards your EPF account every month.

Lets take an example to understand this basic concept - Suppose your monthly basic salary is INR 30,000/- which means that INR 3,600 (12%) would be your contribution towards EPF account. As well as INR 3,600 (12%) would be your employer contribution which is divided as 8.33% towards EPS (maximum upto INR 1,250/-) and rest 3.67% towards EPF contribution in your EPF account.

Now that we have understand the basic theory of EPF account, lets proceed further to understand What is the difference between EPF and EPS?

(1) EPF accounts gives you attractive interest on your monthly contribution as an investments, and that interest rate is determined by the central government of India. It is always higher than your bank FD account. (1) EPS being a pension contribution scheme does not offer any kind of interest. Interest is not applicable on EPS. Hence, no interest is earned on the total sum accumulated in EPS.
(2) In EPF you can withdraw money only when an individual / employee retires from employment or in the case when an individual / employee remains unemployed for a either 2 months of period or more. (2) In EPS you have the option where you can withdraw your entire savings amount or get it transferred by getting a "Scheme Certificate", with a condition that your service period is less than 10 years or there is a break in your employment service.
(3) As an employee, your 12% of your basic salary isĀ  contributed towards EPF account completely. (3) An employee does not make any contribution towards his owned EPS account. Only employer contributes towards your EPF account.
(4) Employee Provident Fund account does not provide any such pension benefits to the employee or to his household members (4) EPS provide Pension benefits as a retirement planning. Under this scheme, deep rooted lifelong pension benefits is available to the member and upon his death individuals of the family are entitled to receive pension. Employees can get benefit of this pension after serving for 10 years (minimum period) and reaching the age 50 years.

It is obviously when you are salaried person and invest / contribute towards an employee provident fund account, by default your employer enroll his contribution towards your Employee Pension Scheme. Furthermore, you can appreciate and enjoy the scheme benefits of EPS account without paying any extra penny from your pocket.

This post was modified 2 months ago by Sagar Shah