EPF vs EPS – Understanding the Difference Between the Two

05^th Nov 2025...

Published By : 811

Key Takeaways

EPF (Employees’ Provident Fund) is a retirement savings scheme focused on building a lump-sum corpus, while EPS (Employees’ Pension Scheme) provides a fixed monthly pension after retirement.
Both schemes are managed by the Employees’ Provident Fund Organisation (EPFO) and are funded through monthly contributions from both employer and employee.
In EPF, the employee contributes 12% of basic salary plus dearness allowance, and the entire amount goes into the EPF account.
In EPS, 8.33% of the employer’s contribution (up to ₹15,000 of basic pay) goes toward the pension fund, while the remaining 3.67% stays in EPF.
EPF earns annual interest (currently around 8.25%), while EPS does not earn interest — pension benefits are calculated using a fixed formula based on years of service and average salary.
EPF payouts are received as a lump sum at retirement, whereas EPS provides lifelong monthly income after completing 10 years of service.
EPF maturity and withdrawals are tax-free under Section 80C and Section 10(11), but EPS pensions are taxable as income.
Together, EPF and EPS ensure both a retirement corpus and steady post-retirement income, creating a balanced financial safety net for employees.

Most salaried employees know that a portion of their salary goes towards the Employees’ Provident Fund (EPF). However, not everyone is aware that a part of that contribution also goes into another fund called the Employees’ Pension Scheme (EPS). Both are managed by the Employees’ Provident Fund Organisation (EPFO) and aim to offer financial stability to employees, but they serve different purposes.

If you’ve ever wondered about EPS vs EPF, how they differ, and what role each plays in your retirement planning, this guide will help you understand the two schemes clearly.

What Is EPF?

The Employees’ Provident Fund (EPF) is a retirement savings scheme created under the Employees’ Provident Funds and Miscellaneous Provisions Act, 1952. It is mandatory for salaried employees earning up to a specified limit in establishments covered under the Act.

Every month, both the employee and employer contribute 12% of the employee’s basic salary plus dearness allowance to the EPF account. The employee’s entire contribution goes into their EPF, while the employer’s contribution is divided between EPF and EPS.

The amount accumulated in the EPF account earns interest, which is declared annually by the government. This fund serves as a financial cushion after retirement or in the event of unemployment, illness, or other emergencies. Employees can also partially withdraw the corpus for specific purposes, such as housing, medical expenses, or education.

Also Read: Your Guide to EPF Passbook Access and Balance Tracking

What Is EPS?

The Employees’ Pension Scheme (EPS) was introduced in 1995 to provide a steady pension to employees after retirement. It is also managed by the EPFO and is funded through a portion of the employer’s contribution to EPF.

While employees do not directly contribute to EPS, 8.33% of the employer’s 12% contribution (up to a limit of ₹15,000 of basic salary) is diverted towards the pension fund. The government also contributes an additional 1.16% to the scheme.

The purpose of EPS is to ensure that employees receive a monthly pension after they retire, provided they have completed at least 10 years of eligible service. This makes EPS an essential complement to EPF in long-term financial security.

Key Difference Between EPF and EPS

Although both schemes fall under the same umbrella and are managed by the EPFO, they have distinct objectives, contribution structures, and benefits. The table below highlights the main differences between the two.

Parameter	EPF (Employees’ Provident Fund)	EPS (Employees’ Pension Scheme)
Purpose	To help employees build a retirement corpus through regular savings.	To provide employees with a monthly pension after retirement.
Established Under	Employees’ Provident Funds and Miscellaneous Provisions Act, 1952	Employees’ Pension Scheme, 1995
Eligibility	Mandatory for employees earning up to ₹15,000 per month; voluntary for others.	Applicable to employees who are members of EPF and have completed 10 years of service.
Contribution	Employee: 12% of basic pay + DA; Employer: 12% (out of which 8.33% goes to EPS).	Funded by 8.33% of the employer’s EPF contribution and 1.16% from the government.
Withdrawals	Full or partial withdrawals allowed under specific conditions like retirement, unemployment, or emergencies.	Pension starts after retirement; lump-sum withdrawal only under certain cases (if service is less than 10 years).
Interest Rate	Decided annually by the government; currently around 8.25% (FY 2024–25).	No interest is paid on the pension amount; benefits are fixed as per the EPS formula.
Payout Type	Lump-sum amount with accumulated interest on retirement or withdrawal.	Monthly pension after retirement based on pensionable salary and service period.
Tax Benefits	Eligible for tax deductions under Section 80C; maturity proceeds are tax-free if conditions are met.	Pension received is taxable as income in the year it is received.
Managing Authority	Employees’ Provident Fund Organisation (EPFO)	Employees’ Provident Fund Organisation (EPFO)

How EPF and EPS Contributions Work

When you contribute to EPF every month, the contribution is split as follows:

Employee’s contribution: 12% of basic pay + DA goes fully to EPF.
Employer’s contribution: 12% is divided as:
- 8.33% to EPS (subject to the salary ceiling of ₹15,000)
- 3.67% to EPF

For instance, if your basic salary is ₹20,000, the maximum amount considered for EPS contribution is ₹15,000. So, ₹1,250 (8.33% of ₹15,000) goes into EPS, and the remaining ₹1,150 goes into your EPF.

This split ensures that employees build both a lump-sum corpus (through EPF) and a pension entitlement (through EPS).

Withdrawal Rules

EPF Withdrawal:

Employees can withdraw their EPF corpus:

On retirement (after reaching 58 years of age).
After two months of continuous unemployment.
Partially, for reasons like home purchase, education, or medical needs.

EPS Withdrawal:

EPS can be withdrawn only under specific conditions:

If you have completed less than 10 years of service, you can withdraw the pension amount as a lump sum by submitting Form 10C.
If you have completed 10 years or more, you are eligible for a lifelong pension, payable after you reach 58 years.

Both schemes have separate forms and processes, which can be completed online through the EPFO Member e-Sewa Portal.

Pension Calculation Under EPS

The monthly pension under EPS is determined by this formula:

Pension = (Pensionable Salary × Pensionable Service) ÷ 70

Pensionable Salary is the average monthly salary during the last 60 months of employment.
Pensionable Service refers to the total years of eligible service under EPS.

For example, if your average salary for the last 60 months is ₹15,000 and you’ve completed 20 years of service, your pension will be:

(₹15,000 × 20) ÷ 70 = ₹4,285 per month approximately.

This fixed-income stream supports employees’ post-retirement, while the EPF amount provides the larger lump-sum benefit.

Benefits of Having Both EPF and EPS

Together, EPF and EPS form a balanced retirement savings structure:

EPF ensures liquidity and corpus accumulation: You get a substantial amount upon retirement or withdrawal, which can be used for larger financial goals.
EPS ensures regular post-retirement income: It provides lifelong pension security.
Combined advantage: You get both long-term savings and financial stability during your non-working years.

By contributing to both schemes, employees create a well-rounded safety net that caters to both immediate and future financial needs.

Points to Remember

You must have an active UAN (Universal Account Number) to manage your EPF and EPS accounts.
Both EPF and EPS are transferable when you change jobs.
Always ensure your Aadhaar, PAN, and bank details are linked to your EPF account.
If you exit employment before 10 years of service, it is advisable to withdraw EPS before applying for pension later.
Keep track of your contributions regularly through the EPFO portal or the Umang app.

Final Thoughts

Both EPF and EPS serve different but equally important roles in retirement planning. While EPF helps you build a sizable savings corpus with interest, EPS guarantees a steady pension after retirement.

Understanding the distinction between EPF vs EPS helps you plan your financial future better and make informed decisions about withdrawals, transfers, and retirement timing.

With digital banking platforms like Kotak 811, you can easily track your salary credits, automate EPF-related transactions, and manage your long-term savings with complete transparency. Staying informed about your EPF and EPS contributions today can help you enjoy financial independence tomorrow.

FAQs on EPF and EPS

1. Can I withdraw both EPF and EPS when I change jobs?

No. EPF automatically transfers when you join a new employer under the same UAN. However, EPS benefits continue accumulating and can be claimed after 10 years of service or withdrawn before that using Form 10C.

2. Is the pension under EPS taxable?

Yes. Pension received from EPS is treated as income and taxed according to your applicable tax slab.

3. Can I contribute more than 8.33% to EPS?

No. The EPS contribution is fixed by law at 8.33% of the employer’s share, capped on ₹15,000 of salary.

4. What happens if I leave my job before completing 10 years?

You can withdraw your EPS amount using Form 10C. If you return to employment later, your previous service period can be added to the new one for pension eligibility.

5. How can I check my EPF and EPS balance?

You can check your EPF and EPS details online through the EPFO Member e-Sewa Portal or the Umang mobile app using your UAN and registered mobile number.