EPF vs EPS: Pension Schemes in India

6 mins read
by Angel One
The Employee Provident Fund scheme helps build a retirement corpus, while the Employee Pension Scheme pays out regular pensions. Understand these schemes better with an EPF vs EPS comparison.

The Employees’ Provident Funds Act governs many of the pension schemes available in India. More specifically, three pension schemes are currently active and regulated by this Act, namely: 

  • Employees’ Provident Fund (EPF) Scheme, 1952
  • Employees’ Deposit Linked Insurance (EDLI) Scheme, 1976
  • Employees’ Pension Scheme (EPS), 1995 

Of these, it’s a common error to mistake the EPF for the EPS scheme and vice versa. In this article, we’ll take a closer look at the EPF vs EPS comparison and delve into the finer details of both these pension schemes. Read the details below for a more thorough understanding of the differences between EPF and EPS.

What is the EPF Scheme?

The Employees’ Provident Fund (EPF) scheme is a retirement savings program backed by the government in India. It is designed to provide financial security to employees after their retirement. The EPF Scheme is governed by the Employees’ Provident Fund Organization (EPFO) and is a crucial component of social security and retirement planning for Indian workers.

Under this scheme, both the employer and the employee make regular contributions towards the employee’s provident fund account. The funds accumulate over time and earn interest during the employment period. The corpus can be withdrawn upon retirement, resignation, or under certain specific circumstances, such as buying a house or for medical emergencies. 

Also Read More About How to Link Aadhaar Card with EPF Account?

What is the EPS Scheme?

The Employees’ Pension Scheme (EPS) is an integral part of the Employees’ Provident Fund (EPF) scheme in India. It is designed to provide pension benefits to employees upon their retirement. Under the EPS, a portion of the employer’s contribution to the EPF is allocated to the pension fund. 

The pension amount is determined based on the employee’s years of service and average salary during the last few years of employment. The EPS ensures financial security for retired individuals by offering them a regular pension income. It is also administered by the Employees’ Provident Fund Organization (EPFO) along with the EPF scheme.

Calculation of EPF

Before we get into the differences between EPS and EPF calculations, let’s sum up the breakup of the employee and employer contributions to these schemes. For the purpose of this breakup, the term ‘salary’ refers to the sum of the employee’s basic salary and dearness allowance (DA).

Particulars Contribution or Details
Employee contribution to EPF 12% of the salary
Employer contribution to EPF  3.67% of the salary
Employer contribution to EPS 8.33% of the salary 

So, for instance, if your salary is ₹20,000, your contribution to your EPF account will be ₹2,400 (i.e. 12% of the salary). Your employer’s contribution to your EPF account will be ₹734 (i.e. 3.67% of the salary). 

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Calculation of EPS

The employee does not directly contribute to their EPS account. The employer’s contribution to the employee’s EPS account is 8.33% of the salary. So, continuing the above example, your employer’s contribution to your EPS account will be ₹1,666 (i.e. 8.33% of the salary). 

As for the monthly pension payable under the Employee Pension Scheme, it is computed using the formula shown below: 

Monthly Pension = (Pensionable Service x Pensionable Salary) ÷ 70

Here, the pensionable service is the duration of your employment or service during which you made regular contributions to your EPF and EPS account. The pensionable salary is the average basic salary you earned over the 5 years prior to the date of your retirement. 

Benefits of EPF

The Employees’ Provident Fund offers a host of benefits to its subscribers. Here’s a quick overview of some of the key advantages. 

  • Builds a Retirement Corpus 

The regular contributions to your EPF account throughout your working years help build a sizable corpus. This corpus is available once you retire and can be used as a financial safety net for your post-retirement life. 

  • Guaranteed Returns

The returns from your EPF account are fixed and guaranteed. Moreover, since the Employees’ Provident Fund is a government-backed scheme, there’s zero risk of default.

  • Tax Benefits 

The contributions you make towards your EPF account can be claimed as a deduction from your total income under section 80C of the Income Tax Act. The maximum amount you can claim under this section is limited to ₹1.5 lakh per financial year. 

  • Partial Withdrawals

A partial withdrawal facility is available once you complete seven years of contributions towards your EPF account. You can withdraw up to 50% of your total corpus to pay for your child’s education, home purchase and medical emergencies. 

Benefits of EPS

Before we head over to look at the difference between EPS and EPF, let’s quickly go through the various benefits of the Employees’ Pension Scheme. 

  • Stable Income Source

EPS ensures that the employees receive a monthly pension once they retire. These regular payments provide financial support and enable subscribers to live a comfortable post-retirement life. 

  • Family Pension

In the case of the death of the subscriber, the spouse of the deceased can continue to avail of the pension benefits in the form of a family pension. This ensures that the family receives continued financial support. 

  • Disability Pension

In the event of a permanent disability due to an accident or illness, the affected subscriber can apply for a disability pension. The pension, in this case, will be paid for life from the date of permanent disability. 

  • Transferability 

Similar to EPF, the Employees’ Pension Scheme account can also be transferred over to your new employer when you switch jobs. The ability to transfer accounts freely enables you to continue your pension contributions without any breaks. 

EPF vs EPS: Key Differences 

Now that you know the basics of these two schemes and the fundamentals of the EPF vs EPS comparison, you can better appreciate how they differ. The table below summarises the differences between EPF and EPS.

Aspect Employees’ Provident Fund Scheme (EPF) Employees’ Pension Scheme (EPS)
Meaning A retirement savings scheme where both employer and employee contribute A pension provision scheme under the EPF where only the employer contributes
Purpose To provide a lump sum amount at the time of retirement or during emergencies To provide a monthly pension after retirement
Employees’ Contribution 12% of the basic salary and dearness allowance  Nil
Employer’s Contribution 3.67% of the employee’s basic salary and dearness allowance  8.33% of the employee’s basic salary and dearness allowance 
Employee Eligibility All employees in organisations covered by the EPFO Employees with salary + dearness allowance not exceeding ₹15,000
Maximum Contribution 12% of the salary, with no upper limit Limited to 8.33% on the maximum permissible salary of ₹15,000, i.e. ₹1,250
Withdrawal  Permitted after the employee attains the age of 54 Not applicable since this is a pension scheme
Transferability  Can be transferred from one employer to another when an employee changes jobs Linked with EPF, so it is also transferable 
Interest on Contributions Made Interest is earned on the EPF amount, which is set by the EPFO annually No interest as it’s a pension scheme
Tax Benefits Employee contributions are eligible for tax benefits under section 80C  The pension amount may be taxable based on the individual’s income tax slab


This concludes the EPS vs EPF comparison. The bottom line is that many eligible employees benefit from both these retirement-oriented schemes. Depending on your salary, you may also be enrolled in one or both of these schemes. Now that you know how they work and what the differences between EPF and EPS are, you can plan your contributions, withdrawals and tax-related investments in a way that maximises your overall financial benefits.


Is the interest earned on EPF taxable?

If you contribute more than ₹2.5 lakh per year to your EPF account, the interest earned on your EPF investments is taxable. This limit is ₹5 lakh if the employer does not contribute towards your EPF.

Do I earn interest on my EPS contribution?

The Employee Pension Scheme (EPS) is a pension system where regular pension payouts are made after the employee retires. So, no interest is earned on the contributions.

What happens to my EPF and EPS when I switch jobs?

When you switch jobs, your EPF can be transferred from one employer to another. Since EPS is linked with EPF, it also gets transferred.

Can I contribute more than the mandatory amount to my EPF?

Yes, you can voluntarily contribute more than the mandated 12% to your EPF. This is known as a Voluntary Provident Fund (VPF). However, the employer is not obligated to match this additional contribution.

Are all organisations in India required to provide EPF and EPS?

All organisations in India with 20 or more employees are mandated to register with the EPFO and provide EPF and EPS benefits to their employees.