Should you submit application for higher pension under EPS by 3rd March 2023?

Key benefits of opting for higher pension under EPS

Kuldeep Parashar, Co-Founder, Pensionbox, said, “As the world of work continues to evolve, it is becoming increasingly important for individuals to take control of their financial future. This is especially important when it comes to retirement planning. This is obviously true, and EPFO ​​provides a valuable opportunity-cum-commitment to ensure that individuals who wish to secure their financial future in their golden years have appropriate resources. By allowing contributions on higher salaries, the EPS scheme enables individuals to augment their retirement corpus, which can provide financial stability during their golden years. We are passionate about creating awareness and hence, with the 1 lakh With a user base of individuals, we are well positioned to help spread the word.”

“We recognize that everyone contributing to the Fund for many years and looking for a way to maximize their retirement savings has an excellent opportunity to secure their financial future, and that is why we want to provide our users with those benefits. We are committed to helping those who are covered under it. EPS Scheme. As the world becomes increasingly uncertain, it is essential to have a robust retirement plan. Higher Pension Benefits of EPS Scheme for EPFO ​​Members provide a much needed security, giving them peace of mind with financial security and ensuring they are well prepared for whatever the future holds.”

Dr. K Hema Divya, HOD, Department of MBA, KL Business School said, “The revised EPFO ​​rules were issued two weeks before the Supreme Court deadline of four months. With this new rule, we are able to get higher pension. With better contribution as the pension will be based on the actual basic pay rather than capping the statutory wage limit. The main advantage of opting for a higher pension is that it enables you to accumulate a pension corpus, which will later Will provide a guaranteed income. Retirement. This is especially helpful if you have trouble saving money, need a steady income, and have a tendency to spend more.”

EPS and EPF Contribution

Nikhil Vikamse, Senior Partner Alpha Capital said that currently employees and employers contribute 12% of their basic salary and dearness allowance to their EPF account. Employers’ contribution of 12%, 8.33% goes to Employees’ Pension Scheme and 3.67% to EPF. However, this 8.33% EPS contribution is capped at a maximum amount 15000/- even when the employee draws more salary.

The Supreme Court in its recent announcement has made it clear that the higher EPS for employees who were part of EPF before 01/09/2014 but did not exercise joint option within 03/03/23 Contribution will be counted. date of their joining.

For example:

Mr. ‘X’ became a member of EPF in 1998.

He has not exercised the combined option.

In 2015, his salary increased to Rs 50,000.

His employer contributes Rs 6,000 (i.e. 12% of his basic salary) to the EPF.

Of the employer’s contribution, Rs 1,250 (i.e. 8.33% of Rs 15,000; statutory wage limit) will go to EPS.

The remaining Rs 4,750 (ie Rs 6,000 – Rs 1,250) will go to the EPF.

He exercises the joint option within 03/03/2023 as per the Supreme Court judgment as the EPS contribution is above the statutory wage limit of Rs.6,500.

After submitting the joint option, his employer will contribute Rs 4,165 (i.e. 8.33% of Rs 50,000; his actual salary) and Rs 1,835 (Rs 6,000 – Rs 4,165) to the EPF.

EPFO will calculate the monthly EPS amount at 8.33% of the actual salary and transfer the difference amount from EPF to EPS.

In such cases, EPFO ​​will revert to the date of joining or 01/11/1995, whichever is later, and transfer the difference from PF account to EPS account. But, the higher pension contribution will reduce the EPF lump sum corpus that the employee gets on retirement.

Should you opt for it or not?

Nikhil Vikamse said, “It benefits individuals who want higher monthly pension but do not require a large lump sum amount on retirement. Higher pension contribution will increase the monthly pension amount but EPF lump sum amount given to employees on retirement Thus, individuals who have other investments and would receive a lump sum amount on its maturity, can opt for a higher pension plan. Though the monthly pension is taxable, the lump sum EPF amount given after retirement is taxable. tax exemption.”