What Is The Difference Between EPF & EPS?

Pragya Pathak

Author

Updated: 16-04-2025 at 12:38 PM

Financial security and stability are two of the things that every person works toward. Every working individual ensures that their respective jobs come with a financial safety package and to ensure the same, the government of India established the Employees’ Provident Fund Organisation (EPFO).

The Employees’ Provident Fund Organisation (EPFO) introduced the Employee Provident Fund (EPF) and the Employees’ Pension Scheme (EPS) under the EPF & Miscellaneous Provisions Act, 1952. The schemes were introduced with just one primary aim and that is to protect people by providing them with financial security.

Read the article to learn about the specifics of both, EPF and EPS and how they both differ from each other.

Overview

Name of the scheme	Employee Provident Fund (EPF) and Employee Pension Scheme (EPS)
Managed by	Employees’ Provident Fund Organisation (EPFO)
Act	The EPF & Miscellaneous Provisions Act, 1952
Benefits	To provide financial security to all the salaried employees earning at least Rs. 15,000 per month

What Is An Employee Provident Fund?

The Employee Provident Funds (EPF) is a savings scheme that provides financial security to employees after retirement. EPF works under the Employees’ Provident Fund Organisation (EPFO). It is a mandatory program to safeguard every salaried employee’s future in India wherein both, the employer and the employee contribute 12% of the basic salary and Dearness Allowance (DA) toward an employee’s fund.

For Whom Is An EPF Applied To?

Employee Provident Funds are applied to those organisations that have a workforce of more than 20 employees and where the employees are earning a minimum of Rs. 15,000 (basic + DA). Employees can voluntarily opt for it or opt out of it at their convenience and choice.

Can One Withdraw EPF Before Its Maturity?

Yes, one can withdraw funds from their EPF accounts before its maturity but only in some special cases like marriage, educational purposes, loan repayment, unemployment, etc. In case, if an employee wishes to withdraw before the EPF completes at least 5 years, a 10% tax is applied.

What Is The Employee Pension Scheme (EPS)?

The Employee Pension Scheme (EPS) under the Employees’ Provident Fund Organisation (EPFO) was introduced to provide a stable income to employees after they reach the age of 58. i.e. the retirement age. The EPS is a pension scheme only given to employees working in the organised sector for at least 10 years. Both, the employer and the employee contribute 12% to an employee’s EPF account wherein the employer’s share of 8.33% goes toward the employee’s EPS, and the rest 3.67% goes towards the employee’s EPF account.

How Would The Pension Be Calculated Under The EPS?

The pension is calculated under EPS based on the pensionable salary and service. The formula used to calculate the employee’s pension is:

Pensionable salary x Pensionable service/ 70, wherein,

Pensionable salary: The employee's average monthly salary drawn in the last 60 months before retirement is the pensionable salary. If there are non-contributory periods, those days will not be considered and the benefit will be carried forward.
Pensionable service: The duration of time that the employee served is the pensionable service. The total duration of service under all the employers is counted and the employees are required to submit an EPS Certificate to the employer whenever they change jobs. The pensionable service is calculated on a 6-month basis. Employees also get a bonus of 2 years after completing 20 years of service.

Can One Withdraw A Lump-Sum Amount From EPS?

Yes, one can withdraw a lump-sum amount from the Employee Pension Scheme but only if they fulfil two conditions:

If they leave to quit their jobs before completing a minimum of 10 years of service.
If they have reached the age of 58 years.

What Is A Scheme Certificate?

A scheme certificate is provided to employees who are switching jobs and choosing to retain their EPFO membership. Scheme certificate is given to employees in all conditions whether they complete 10 years of service or not. Scheme certificate has more than one use as it can be used for withdrawing funds from one’s EPF or to transfer the pension’s benefits to the family members when a pensioner dies.

Are EPF Or EPS Account Transferable?

Yes, EPF and EPF accounts are transferable but to do the same, the employee must have a valid and active Universal Account Number (UAN) and link that with their valid ID proofs like Aadhaar or PAN card. UAN is like an identification number that doesn’t change over time and carries all the details of an employee’s work life.

Also Read: Reactivate Your Disabled UAN Account With These Simple Steps!

Difference Between EPF & EPS

Some key differences exist between the Employee Provident Funds and the Employee Pension Scheme. The major differences are listed below:

Components	Employee Provident Funds (EPF)	Employee Pension Scheme (EPS)
Employee’s contribution	12% of basic salary and DA	---
Employer’s contribution	3.67% of basic salary and DA	8.33% of basic salary and DA
Eligible employees	All working employees who earn a salary of at least Rs. 15,000	Employees working in the organised sector for at least 10 years
Interest	Calculated every month and paid at the end of the year	---
Withdrawal	After the employee reaches the age of 58 or if they remain unemployed for more than 60 days	After the employee reaches the age of 58
80C deductions	Up to Rs. 1.5 lakh of employee’s contribution	No deduction
Tax	- If the employee’s contribution is more than Rs. 2.5 lakh annually. - If an employee wishes to withdraw before the EPF completes at least 5 years, a 10% tax is applied.	Pension and lump-sum, both are taxable.

Conclusion

The Employee Provident Funds (EPF) and Employee Pension Scheme (EPS), were both introduced by the Employees’ Provident Fund Organisation (EPFO) to provide financial cover to the employees and recognise their work and efforts.

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