{"id":6123,"date":"2023-05-16T13:40:26","date_gmt":"2023-05-16T08:10:26","guid":{"rendered":"https:\/\/cacube.in\/?p=6123"},"modified":"2023-08-17T17:42:25","modified_gmt":"2023-08-17T12:12:25","slug":"what-is-eps-95-what-are-the-basic-features-of-eps-95-scheme-what-are-important-changes-in-eps-95-scheme-since-inception-what-are-changes-in-eps-95-w-e-f-1-9-2014-what-are-different-types-of-pens","status":"publish","type":"post","link":"https:\/\/cacube.in\/?p=6123","title":{"rendered":"All about EPS-95 pension Scheme and Option for higher pension under para 11(3) & 11(4) of EPS-95 with changes upto 01.06.2023"},"content":{"rendered":"\n

What is EPS-95?<\/strong><\/h2>\n\n\n\n

section 6A(1) of THE EMPLOYEES\u2019 PROVIDENT FUNDS AND MISCELLANEOUS PROVISIONS ACT, 1952 provides that-<\/strong><\/p>\n\n\n\n

The Central Government may, by notification in the Official Gazette, frame a scheme to be called the Employees\u2019 Pension Scheme for the purpose of providing for\u2014<\/p>\n\n\n\n

 (a) superannuation pension, retiring pension or permanent total disablement pension to the employees of any establishment or class of establishments to which this Act applies; and<\/p>\n\n\n\n

(b) widow or widower\u2019s pension, children pension or orphan pension payable to the beneficiaries of such employees.<\/p>\n\n\n\n

In exercise of the powers conferred by Section 6A of the Employees’ Provident Funds and Miscellaneous Provisions Act, 1952 (19 of 1952), the Central Government came up with a scheme called \u201cThe Employees’ Pension Scheme, 1995\u201d or \u201cEPS-95\u201d. This Scheme came into force on 16th day of November, 1995.<\/strong><\/p>\n\n\n\n

This EPS-95 is a pension scheme which is different from National Pension Scheme (NPS)<\/strong>. NPS is another Scheme for which separate deduction under section 80CCD(1B) & 80CCD(2)<\/strong> of Income Tax is available. NO Such deductions are available in case of EPS. There is option for return of corpus in NPS but there is not option for return of corpus in case of EPS. These two schemes are not related to each other. An employee may have both of these scheme or any of these schemes or none of these schemes, it depends on the choice opted by the employee. There is no restriction on being beneficiary in both the schemes.<\/p>\n\n\n\n

What are the basic features of EPS-95 Scheme?<\/strong><\/h2>\n\n\n\n

Some important features of EPS-95 as amended till date can be enlisted as below: –<\/strong><\/p>\n\n\n\n

1. Date of applicability<\/h4>\n\n\n\n

Employee Pension Scheme which came into force on 16th November 1995<\/strong> hence known as The Employees’ Pension Scheme, 1995 or EPS-95.<\/p>\n\n\n\n

2. Administration of EPS-95<\/h4>\n\n\n\n

EPS-95 is administered<\/strong> by The Employees\u2019 Provident Fund Organisation.<\/p>\n\n\n\n

3. Corpus of EPS-95<\/h4>\n\n\n\n

EPS-95 is not an investment-based scheme, contribution to scheme is not your corpus but if you are a member to the scheme then contribution by your employer to this scheme is an expense and you are not getting it back any way. You will be getting life-time pension to you and your spouse (children pension only upto the age of 25 years).<\/p>\n\n\n\n

4. Basis of pension under EPS-95<\/h4>\n\n\n\n

Pension under EPS-95 is not calculated by value of your contribution but your pension value is based on your pensionable salary (avg Salary for 60 months at the time of retirement) and Pensionable Service (no. of years of membership of EPS)<\/p>\n\n\n\n

5. Taxability of Pension under EPS-95<\/h4>\n\n\n\n

Pension under EPS-95 is taxable <\/strong>under the head \u2018Income from Salary\u201d.<\/p>\n\n\n\n

6. Types of pensions under EPS-95<\/h4>\n\n\n\n

EPS-95 Scheme offers different types of pension such as Superannuation pension (58 years), Deferment Pension(60 years), Early Pension (Unemployed & 50years), Disablement Pension, Widow Pension, Children Pension, Orphan Pension.<\/p>\n\n\n\n

7. Eligibility for pension under EPS-95 (minimum service period)<\/h4>\n\n\n\n

To be eligible for pension, you must have completed at least 10 years<\/strong> of service.If a member has not rendered the eligible service of 10 years on the date of exit, or on attaining the 58 years of age, whichever is earlier, such member shall be entitled to a withdrawal benefit but not pension. (Except in case of death of employee or permanent disability during the service, in such case employee\/widow\/children are entitled to pension).<\/p>\n\n\n\n

8. Date of retirement\/superannuation under EPS-95<\/h4>\n\n\n\n

Regular pension under EPS-95 starts at age of superannuation i.e.58 years. <\/strong>Hence An employee shall cease to be the member of Pension Fund from the date of attaining 58 years of age or from the date of vesting admissible benefits under the Scheme, whichever is earlier.<\/p>\n\n\n\n

9. Deferment of Pension under EPS-95<\/h4>\n\n\n\n

As per clause 12(7B) of this scheme, a member who has attained the age of 58 years is allowed to defer the age of drawing pension upto 60 years<\/strong> of age. In case of deferment, the amount of pension shall be increased at the rate of 4% for every completed year after the age of 58 years.<\/p>\n\n\n\n

10. Early pension under EPS-95 if employment is lost<\/h4>\n\n\n\n

If an employee has rendered eligible service of 10 years or more and retires or otherwise ceases to be in the employment before attaining the age of 58 years, if he so desires, may be allowed to draw an early pension from a date earlier than 58 years of age but not earlier than 50 years of ag<\/strong>e. In such cases, the amount of pension shall be reduced at the rate of 4%, for every year the age falls short of 58 years.<\/p>\n\n\n\n

11. Maximum Pension under EPS-95<\/h4>\n\n\n\n

Maximum Pension under the scheme is 50%<\/strong> of pensionable salary.<\/p>\n\n\n\n

12. Pensionable Salary under EPS-95 upto 31.8.2014<\/h4>\n\n\n\n

Upto 31.8.2014, The pensionable salary shall be the average monthly salary (Basic +DA+RA) during contributory period of service in the span of 12 months<\/strong> preceding the date of exit from the scheme. (This is subject to maximum limit of pensionable salary, if option for contribution at actual salary is not taken)<\/strong><\/p>\n\n\n\n

13. Pensionable Salary under EPS-95 w.e.f. 01.09.2014<\/h4>\n\n\n\n

W.e.f. 1.09.2014, The pensionable salary shall be the average monthly salary (Basic +DA+RA) during contributory period of service in the span of 60 months<\/strong> (average for 12 months for pensionable service upto 31.8.2014) preceding the date of exit from the scheme. (This is subject to maximum limit of pensionable salary, if option for contribution at actual salary is not taken)<\/strong><\/p>\n\n\n\n

14. Maximum limit of pensionable Salary under EPS-95<\/h4>\n\n\n\n

At the start of the scheme EPS-95 (16.11.1995), maximum pensionable salary was Rs. 5000. W.e.f. 01.06.2001 , the maximum pensionable salary was increased to Rs. 6500. W.e.f. 1.09.2014, The maximum pensionable salary was again increased to Rs.15000\/- per month.(if option for contribution at actual salary is not taken)<\/strong><\/p>\n\n\n\n

15. Option to remove Maximum limit of pensionable salary and to opt actual salary as pensionable Salary (Para 11(3) of EPS-95)<\/h4>\n\n\n\n

W.e.f. 16.03 1996, option was given under clause 11(3),to contribute to the scheme considering a percentage on the actual salary, provided the employee and the employer have no objection. This option was added without any deadline<\/strong> to exercise. It stated that \u201cProvided that if at the option of the employer and employee,contribution paid on salary exceeding Rs.6500\/- per month from the date of commencement of this Scheme or from the date salary exceedsRs.6500\/-whichever is later, and 8.33% share of the employers’ thereof is remitted into the Pension Fund, pensionable salary shall be based on such higher salary\u201d.<\/p>\n\n\n\n

W.e.f. 01.September 2014, option for higher pension (without any deadline) was deleted <\/strong>and nullified the choice of an employee to exercise the right to contribute to EPS on higher\/ uncapped salary, and subsequently to earn higher pension.<\/p>\n\n\n\n

16. Fresh Option to remove Maximum limit of pensionable salary and to opt actual salary as pensionable Salary (Para 11(4) of EPS-95)<\/h4>\n\n\n\n

W.e.f 01.09.2014, the fresh option was inserted in clause 11(4) with a condition of additional contribution of 1.16% in addition to 8.33%<\/strong>. This option to opt for higher pensionable salary which was to be exercised jointly by the employer and employee continue to  contribute on salary exceeding fifteen thousand rupees per month and the pensionable salary for the existing members who prefer such fresh option shall be based on the higher salary. Fresh option for higher salary was to be exercised by the member within a period of  6 months from the 01.09.2014.<\/strong><\/p>\n\n\n\n

17. Consequence of Not-opting for option of Higher pension under para 11(4) of EPS-95<\/h4>\n\n\n\n

Option to opt for higher pensionable salary which was to be exercised jointly by the employer and employee continue to contribute on salary exceeding Rs. 15000\/- per month and the pensionable salary for the existing members who prefer such fresh option shall be based on the higher salary and if no option is exercised by the member within such period (including the extended period), it shall be deemed that the member has not opted for contribution over wage ceiling and the contributions to the Pension Fund made over the wage ceiling in respect of the member shall be diverted to the Provident Fund account of the member along with interest as declared under the Employees’ Provident Funds Scheme from time to time.<\/p>\n\n\n\n

18. New Deadline to for Option to remove Maximum limit of pensionable salary and to opt actual salary as pensionable Salary (Para 11(4) of EPS-95)<\/h4>\n\n\n\n

Hon\u2019ble Supreme Court vide <\/strong>judgement dated 04.11.2022, allowed eligible employees to submit fresh option within 4 months from the date of this judgement i.e upto 03.03.2023 which was extended to 03.05.2023 by EPFO. Now EPFO has further extended the deadline to apply for OFHP (option for higher pension) upto 26.06.2023.<\/strong> Application for higher pension can be filled in by eligible employees through online portal of EPFO (https:\/\/unifiedportal-mem.epfindia.gov.in\/<\/a>) .<\/p>\n\n\n\n

19. New Pension calculation method provided by circular 1357 dated 01.06.2023<\/h4>\n\n\n\n

As per EPFO circular date 11.5.2023, The method for computation of pension will be provided in subsequent circular. Hence in circular 1357 dated 01.06.2023<\/a>, EPFO clarified that –<\/p>\n\n\n\n