Mumbai:Most employees are members of the Employees’ Provident Fund (EPF) and have EPF accounts. Of these, eligible employees have Employees’ Pension Scheme (EPS) accounts as well. For such employees, the EPF corpus has a pension component as well, i.e., Employees’ Pension Scheme (EPS).
Here is a look at how and when you can withdraw from your EPS account if you have one. How is Employees’ Pension Scheme account funded?
As per current laws, an employee contributes 12 per cent of his/her monthly salary (basic plus dearness allowance) to his/her EPF account and the employer matches this contribution. Out of the employer’s contribution, 8.33 per cent is contributed to EPS account subject to a maximum of Rs 1,250 per month. The remaining 3.67 per cent along with the employee’s own contribution goes into the EPF account. The 8.33 per cent contribution by employer to the EPS is made on a monthly salary of up to Rs 15,000 which calculates to a maximum of Rs 1250 (8.33 per cent of Rs 15,000). For example, if a person’s monthly salary is Rs 25,000, then the employer’s contribution would be limited to 8.33% of Rs 15,000 only. If the person’s monthly salary is Rs 10,000, then the employer’s contribution to EPS would be 8.33% of Rs 10,000.
Who can withdraw from EPS account?
According to experts, the lump sum withdrawal of money from one’s EPS account is allowed in two situations. Puneet Gupta, Director, EY India says, “As per EPS rules, if any member has completed less than 10 years of service on the date of exit (date on which the member leaves the job in the establishment) or has attained the age of 58 years (whichever is earlier), then the individual is eligible for lump-sum withdrawal from the EPS account.
If such an individual is less than 58 years of age on the date of exit the employee may opt for a Scheme Certificate under the EPS instead of lump sum withdrawal. Such Scheme Certificate may be taken when the individual plans to join back another employment later. If the number of years of service exceeds 10 years, then a Scheme Certificate will be issued to the individual.”
Employees’ Provident Fund Organisation (EPFO) calculates the number of years of service from the date of joining the EPF scheme. However, it is not necessary that the number of years of service be continuous.
Suppose you joined the EPF scheme in 2010 by working with A Ltd and worked there for three years. Then you switched to B Ltd where the employer did not offer the EPF benefit, since they were not covered under the EPF Act. You worked with B Ltd for 4 years. In 2017, you switched to C Ltd where you were under the EPF scheme. Till the current year, i.e., 2020, the number of years of service for EPS withdrawal purposes will be calculated as three years with A Ltd and three years with C Ltd, which is six years. Therefore, in such a scenario you can make a lump sum withdrawal.
How much can one withdraw from EPS account?
The lesser the number of years of service the lower will be the amount give to you in case of lump sum withdrawal before completion of 10 years. Saraswathi Kasturirangan, Partner, Deloitte India says, “The lump sum withdrawal from the EPS scheme is allowed only if the service period is less than 10 years. The amount that will be returned to you will be based on Table-D mentioned in EPS Scheme 1995.”