Employee Pension Scheme: These days the hearing is going on in the Supreme Court regarding the pension of the employees. On the petition of EPFO, now a big bench of the Supreme Court will hear in this matter.
Employee Pension Scheme: Provident fund is a great saving scheme for those working in the private sector. In this, apart from tax exemption, good returns are available and a large corpus is prepared for retirement. It is called retirement fund because during the job, some part is deducted from the salary of the employee and deposited in the provident fund and some part is deposited in the pension fund (Employee Pension Scheme). Employees get the entire PF amount in lump sum at the age of 58. But, the pension amount is decided on a monthly basis. There is a formula to determine this.
EPS is also part of salary
Like EPF, EPS is also a part of the employee’s salary. In EPS, a minimum of Rs 1,000 to Rs 7,500 is available as pension every month. However, most of the people do not know how to calculate the Employee Pension Scheme.
What is the formula of EPS?
12 percent of the basic salary of the employee is deposited in the PF account. The contribution of the employer is also the same. But, a part of the contribution of the employer is deposited in the EPS ie Pension Fund. The contribution of basic salary is 8.33% in EPS. However, the maximum limit of pensionable salary is Rs 15,000. In such a situation, only a maximum of Rs 1250 can be deposited in the pension fund every month.
Pension is available up to Rs 7500
According to the existing rules, if the basic salary of an employee is Rs 15,000 or more, then Rs 1250 will be deposited in the pension fund. If the basic salary is 10 thousand rupees, then the contribution will be only 833 rupees. The calculation of pension on the retirement of the employee is also considered as the maximum salary of 15 thousand rupees (EPS upper limit). In such a situation, after retirement, employees can get only Rs 7,500 as pension under EPS rule.
How is EPS Calculation done?
- Formula for EPS Calculation = Monthly Pension = (Pensionable Salary x Number of Years Contribution in EPS Account)/70.
- If someone’s monthly salary (average of last 5 years’ salary) is Rs 15,000 and the duration of the job is 30 years, then he will get a pension of only Rs 6,828 per month.
- During the service history, the entire amount deposited under the Employee Pension Scheme is deposited with the government. Its benefit is available directly on retirement only.
How much pension will you get if the limit is removed?
If the limit of 15 thousand is removed and your salary is 30 thousand then the pension you will get according to the formula will be this. (30,000 X 30)/70 = 12,857
Existing Conditions for Pension (EPS)
- Must be an EPF member.
- Must be in job for at least 10 regular years.
- Pension is available on attaining the age of 58 years. Option to take pension after 50 years and even before the age of 58.
- On taking the first pension, the reduced pension will be available. For this, Form 10D has to be filled.
- On the death of the employee, the family gets pension.
- If the service history is less than 10 years, then they will get the option to withdraw the pension amount at the age of 58 years.
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