EPFO news: If you are a private sector employee, you have time till June 26, to opt for a higher pension under the Employees’ Pension Scheme (EPS) run by the Employees’ Provident Fund Organisation (EPFO). Although the taxpayers have a sufficient window to opt for the higher pension under EPS. But they should note that choosing the higher pension option means a lower EPF contribution which may result in an overall smaller EPF corpus at withdrawal upon retirement.
Key things that employees need to consider before rejigging their EPF, EPS mix
Taxpayers now have a sufficient window to assess whether they want to opt for higher EPS. This is only eligible for those who meet the criteria according to when they have been members of EPF.
1) Archit Gupta, Founder, and CEO, Clear said one of the first implications for higher EPS is that such employees will automatically have lower EPF contributions. This may result in an overall smaller EPF corpus at withdrawal upon retirement.
The transfer to EPS could be a significant amount when done with retrospective effect, where EPF balance will be moved to EPS, he added.
2) The other point to think about is whether these taxpayers have a plan for utilising their EPF balance on retirement, some intend to buy a home or start a business or any such investment. In such a case, they may want to wait and not do anything and use up the EPF corpus when they retire, explained Gupta
Who should opt for higher EPS
According to Archit Gupta, in case taxpayers are looking at a higher monthly pension income (which is fully taxable, while EPF withdrawal is fully tax-free), they may opt for EPS. This is when they don’t need a large corpus on retirement and would prefer a monthly payout assuming they have many years of retirement ahead of them. One can get a pension as long as they live, and spouses and children may also receive some part of the pension as per eligibility.
According to tax and investment expert Balwant Jain, three factors should be considered before rejigging your EPF, EPS accounts
1) Salary: The first and foremost is what is your take-home salary.
2) Age: Another factor to be kept in mind before option for higher EPS is your age
3) Retirement: Balwant Jain said, one should calculate roughly the salary at the time of retirement.
Meanwhile, subscribers opting for higher pensions will get three months to give their consent for diverting additional contributions or dues under the EPS, stated a circular dated 11 May.
“Pensioners/members may be given up to 3 months to deposit and to give consent for diversion of these dues (in prescribed format).” stated the circular.
The EPFO provided an online facility to submit the joint option form (with employers) to the subscribers for opting for a higher pension till May 3, 2023. Later the deadline was extended until June 26, 2023.
Earlier this month, the labour ministry also clarified that an additional contribution of 1.16 per cent of basic wages for subscribers opting for higher pensions will be managed from employers’ contributions to social security schemes run by EPFO.
Source By: livemint
