 "Higher pension under EPS can lead to lower EPF contribution; what you need to know")
At a time when the Employees’ Provident Fund Organisation (EPFO) extended the last date to apply for higher pension till 26 June, private sector employees have started submitting their applications before the deadline. While the last date has been set after considering various demands from employees, employers, and their associations, EPFO aims to allow subscribers to opt for a higher pension amount by increasing their contribution towards the Employees’ Pension Scheme (EPS). This clearly asserts that choosing a high pension option will result in a smaller EPF corpus at the time of withdrawal upon retirement. This being an optional choice, not every employee will be planning to get a smaller EPF upon retirement or get lesser pensions at regular intervals.
To make a better choice, a few things must be kept in mind and reconsidered before rejigging the EPF and EPS mix.
Things to keep in mind before choosing between a higher pension and a high EPF:
1. Considering that opting for high EPS will automatically lead to lower EPF contributions, resulting in an overall smaller EPF corpus upon retirement, taxpayers need to make their decision accordingly. Those who plan to make a bigger investment after their retirement can avoid choosing higher pensions and use up the EPF corpus as required.
2. Those who are looking forward to receiving a higher monthly pension and don’t need a large corpus on retirement can opt for higher EPS. This will not only assure a better monthly payout as long as they live but their spouses and children may also receive a part of the pension.
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View All3. Before choosing between the two, taxpayers need to know that monthly pension income is fully taxable, while EPF withdrawal is fully tax-free.
4. Apart from all these factors, taxpayers also need to calculate both EPF and high EPS on the basis of their salary, age, and retirement.
Notably, those who still want to opt for higher pensions can apply for the same till 26 June 2023. The extension was given earlier this month.
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