If you’ve ever noticed a section on your salary slip labeled “Provident Fund,” you may have wondered what it is. In short, it’s part of your salary that’s set aside for your retirement. In the larger scheme of things, it’s part of EPS or Employee Pension Scheme, where a portion of your income is given to this scheme to help build a corpus by the time you retire.
Let’s take a closer look at how this works.
What is EPS?
EPS, or the Employee Pension Scheme, is a financial security plan that came into force in 1995 and is run by the Employees Provident Fund Organisation (EPFO). This scheme offers employees a pension after they reach the age of 58. The benefits are offered to both existing and new EPF members; however, the employee must have worked for the company for at least ten years to avail of the scheme’s benefits. Both employees and employers contribute 12% of their base salary and dearness allowance (DA) to the EPF. The employee contributes entirely to EPF, while the employer contributes 8.33% to EPS.
How to Check if You are a Part of EPS?
In order to become a part of EPS and receive lifetime benefits, you must fulfil the following eligibility criteria.
- The applicant should be a member of EPFO.
- The applicant should have work experience of minimum 10 years.
- The applicant’s age must be 58 years.
- The applicant can withdraw his EPS prematurely after he reaches the age of 50 at a low-interest rate.
- The applicant will be entitled to receive the pension at an increased rate of 4% per year if you put off receiving it for two years (until you reach the age of 60).
- Employees with a monthly salary of ₹ 15,000 or less are eligible for EPS.