There are two sections in which the money that you and your employer channel towards an employee’s EPF account get saved. The first is your EPF account while the second is an EPS account, more commonly known as the EPF pension scheme. However, there is much more to your EPF pension than this. In this guide, we would touch upon the lesser-known aspects of it.
Read our complete guide to know the difference between EPF and EPS.
EPS contribution
Only your employer’s share of PF money gets deposited into your EPS. Of the 12% contribution made by an employer, 8.33% goes towards the EPS.
EPF membership mandate
To be an EPS member, an employee must be an EPF member.
Retention of EPS membership
An employee ceases to be a member of the pension fund from the date of attaining 58 years of age, or from the date of vesting admissible benefits under the scheme, whichever is earlier.
Determination of pensionable service
The pensionable service of a member is decided, considering the contributions received in the Employees’ Pension Fund. If a member superannuates on turning 58 years and has rendered 20 years or more of pensionable service, the pensionable service is increased by two years. Thus, an employee joining a workplace at the age of 58 will not be eligible for the EPS.
Also read: National Pension System: All about NPS
Premature EPS withdrawal
A member can withdraw money from the EPS account on turning 50 years of age.
Formula to calculate the PF pension
The formula for calculating the pension amount:
Pension = (Pensionable salary average of last 60 months) x pensionable service / 70
Tax on withdrawal and tax deduction against contribution
The entire pension amount is taxable. Employees cannot claim tax deductions against contributions towards the EPS account, as they are not the ones making the contribution.
Exemption from EPS contribution
Companies can seek exemption from the EPS. However, the same is not true for individual members.
Death of a pensioner
In the event of an employee meeting an untimely death, the spouse will receive the pension, even if the contribution has been made only for a month. In case there is no spouse, the pension will go to an EPF nominee.
Payment of pension
Once the EPS claim is submitted, along with the requisite documents, the beneficiary will receive the pension within 20 days from the date of the application being received by the commissioner. If there is any deficiency in the claim, it will be communicated to the applicant within 20 days from the date of receipt of the application. In case the commissioner fails to settle a claim within 20 days without sufficient cause, he is liable to pay penal interest at the rate of 12% per annum.
See also:Â EPFO claim status: 5 ways to conduct a check for EPF claim status
FAQs
What is the full form of EPS?
EPS stands for Employee Pension Scheme.
What is the full form of EPF?
EPF stands for Employee Pension Fund.
