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Business Laws and Ethics · Employees Provident Fund and Miscellaneous Provisions Act, 1952

Employees' Pension Scheme and Deposit Linked Insurance

Updated 10 October 2026 · Fact-checked

The Employees' Pension Scheme (EPS) pays a monthly pension to EPF members on retirement, disability or death, funded by 8.33% of wages up to ₹15,000 from the employer's share. The Employees' Deposit-Linked Insurance Scheme (EDLI) pays a lump sum to the nominee if a member dies in service. Solve questions using the formulas and caps.

Understand Employees' Pension Scheme and Deposit Linked Insurance

The provident fund law gives an employee three linked schemes: the Employees' Provident Fund (EPF), the Employees' Pension Scheme (EPS) and the Employees' Deposit-Linked Insurance Scheme (EDLI). EPF is a savings fund. EPS gives a monthly income after retirement. EDLI gives life cover while you work. Under the Code on Social Security, 2020, the Central Government frames provident fund, pension and insurance schemes for the same purposes, so the ideas below carry over. Confirm any amended figures against your current ICMAI study material.

Start with how money flows. The employee pays 12% of wages into EPF. The employer also pays 12%, but it is split. 8.33% of wages goes to EPS and the balance of 3.67% goes to the employee's EPF account. The employee never pays into EPS. The Central Government also contributes 1.16% of wages to EPS, up to the ₹15,000 ceiling, i.e. a maximum of ₹174 per month. EPS wages are capped at ₹15,000 a month, so the employer's EPS share cannot exceed 8.33% of ₹15,000.

EPS benefits. The main one is the monthly superannuation pension at age 58 for a member with at least 10 years of eligible service. A member can take early pension from age 50 with a reduction for each year short of 58 (4% per year under the existing EPS; confirm against current material). EPS also pays disablement pension, widow or widower pension, children pension and orphan pension. A member with less than 10 years of service gets a withdrawal benefit, not a pension. The monthly pension is Pensionable Salary × Pensionable Service ÷ 70.

EDLI benefits. The employer alone contributes 0.5% of wages (wage ceiling ₹15,000). If a member dies while in service, the nominee or family receives a lump sum. The sum is 35 times the average monthly wages of the last 12 months, plus a bonus of 50% of the average PF balance of the last 12 months. The bonus is capped at ₹1,75,000, and the whole benefit is capped at ₹7,00,000. If the member had continuous service of at least 12 months in the same establishment or with one or more employers, the benefit is at least ₹2,50,000.

The key contrast for exams: EPF is a lump sum from the employee's 12% and the employer's 3.67% plus interest, EPS is a regular pension from the employer's 8.33%, and EDLI is insurance paid only on death in service.

Key rules to remember

Monthly member pension (EPS)
Monthly pension = (Pensionable salary × Pensionable service in years) ÷ 70
Pensionable salary is the average monthly pay over the 60 months before exit, with wages capped at ₹15,000 a month.
EPS contribution
Employer to EPS = 8.33% of wages (wages capped at ₹15,000); Employer to EPF = 12% − 8.33% = 3.67%
Employee contributes nothing to EPS. The Central Government adds 1.16% of wages up to the ₹15,000 ceiling, a maximum of ₹174 per month.
Pension eligibility
Superannuation pension: age 58 and at least 10 years of eligible service
Early pension is available from age 50 with a reduction for each year short of 58 (4% per year under the existing EPS); confirm against current material. Below 10 years of service, a withdrawal benefit is paid instead.
EDLI benefit on death in service
Benefit = (35 × average monthly wages of last 12 months) + (50% × average PF balance of last 12 months, bonus capped at ₹1,75,000)
Wages are capped at ₹15,000, so the maximum is ₹7,00,000. Minimum is ₹2,50,000 where the member had continuous service of at least 12 months in the same establishment or with one or more employers.
EDLI contribution
Employer pays 0.5% of wages (wages up to ₹15,000)
The employee pays nothing towards EDLI.

How to solve Employees' Pension Scheme and Deposit Linked Insurance questions

Use the same sequence for any question on EPS or EDLI, whether it is theory or a numerical.

  1. 1Identify the scheme asked about: EPF, EPS or EDLI. Many questions test whether you can tell them apart.
  2. 2Note the member's facts: age, years of service, wages, PF balance and the event (retirement, disability, death, or leaving service).
  3. 3Apply the wage cap. Cap wages at ₹15,000 a month for EPS and EDLI before any calculation.
  4. 4Check eligibility. For a pension, check age 58 and 10 years of service, or early pension from 50. For EDLI, check that death occurred while in service.
  5. 5Pick the formula: pension ÷ 70 formula for EPS, or 35 times wages plus the 50% balance bonus for EDLI.
  6. 6Compute step by step, then apply the caps and minimums (₹1,75,000 bonus cap, ₹7,00,000 total, ₹2,50,000 minimum).
  7. 7State the answer in rupees with a one-line conclusion naming who receives the amount (member, spouse, children or nominee).

Quickest way: Cap, Check, Calculate

When to use it: Use this for MCQs and for short numerical parts where you have under two minutes.

  1. Cap wages at ₹15,000 first.
  2. Decide the scheme from the event: retirement means EPS pension, death in service means EDLI, exit with under 10 years means withdrawal benefit.
  3. For pension, multiply 15,000 (or the lower salary) by years and divide by 70.
  4. For EDLI, compute 35 × wages, add half the average balance up to ₹1,75,000, and check the ₹7,00,000 cap.
  5. Eliminate options that show the employee paying into EPS or EDLI.

Common mistakes in Employees' Pension Scheme and Deposit Linked Insurance

  • Saying the employee contributes to EPS or EDLI.

    Students remember the 12% rate and assume each scheme is funded by both sides.

    Fix: Remember that EPS comes out of the employer's 12% (8.33% share) and EDLI is paid by the employer alone at 0.5%.

  • Using actual wages above ₹15,000 in the pension formula.

    Students forget the wage ceiling and use the salary given in the question.

    Fix: Cap pensionable salary at ₹15,000 a month before multiplying by service and dividing by 70.

  • Dividing by 12 or 100 instead of 70 in the pension formula.

    Students mix this with gratuity (15/26) or other formulas.

    Fix: Write the formula once at the top: Pensionable salary × Service ÷ 70.

  • Claiming EDLI pays when a member retires or resigns.

    Students confuse insurance with savings or pension benefits.

    Fix: EDLI pays only on death of the member while in service, to the nominee or family.

  • Ignoring the ₹1,75,000 cap on the balance bonus or the ₹7,00,000 ceiling in EDLI.

    Students add 50% of the balance without checking the limit.

    Fix: After computing the bonus, compare it with ₹1,75,000 and use the lower figure, then check the total.

  • Giving a pension to a member with less than 10 years of service.

    Students assume that any contribution to EPS earns a pension.

    Fix: Check the 10-year condition first. Below it, only a withdrawal benefit is payable.

Worked examples

Example 1

Rakesh Sharma retires at age 58 after 30 years of pensionable service. His pensionable salary is ₹15,000 a month. Compute his monthly EPS pension and name the pension type.

Show the solution
  1. Age 58 and service of 30 years (at least 10), so he qualifies for the superannuation pension.
  2. Pensionable salary is ₹15,000, which is within the cap.
  3. Monthly pension = (15,000 × 30) ÷ 70.
  4. = 4,50,000 ÷ 70 = ₹6,428.57, which is about ₹6,429.

Answer: Rakesh gets a superannuation pension of about ₹6,429 a month.

Example 2

Meera Iyer, an employee of a manufacturing company, dies in service. Her average monthly wages in the last 12 months were ₹18,000 and her average PF balance in that period was ₹3,00,000. She had 5 years of continuous service. Compute the EDLI benefit payable to her nominee.

Show the solution
  1. Cap wages at ₹15,000 for EDLI.
  2. 35 × 15,000 = ₹5,25,000.
  3. Balance bonus = 50% × 3,00,000 = ₹1,50,000, which is below the ₹1,75,000 cap.
  4. Total = 5,25,000 + 1,50,000 = ₹6,75,000.
  5. Check the limits: it is above the ₹2,50,000 minimum and below the ₹7,00,000 maximum.

Answer: The nominee receives ₹6,75,000 under EDLI.

Exam tips

  • Learn the one-line contrast: EPF is savings, EPS is pension, EDLI is insurance on death in service. Short notes and difference questions come from this.
  • Write the formula before substituting numbers. Step marks are given for the formula, the wage cap and the final figure.
  • In MCQs, watch for traps on who contributes. The employee does not pay to EPS or EDLI.
  • Memorise the numbers together: 12%, 8.33%, 3.67%, 0.5%, ₹15,000, 58 years, 10 years, 70, 35 times, ₹1,75,000, ₹7,00,000.
  • Where the question refers to the Code on Social Security, 2020, mention that the schemes are framed under the Code, and use the figures in your current ICMAI material.

Practice questions from Employees Provident Fund and Miscellaneous Provisions Act, 1952

Employees' Pension Scheme and Deposit Linked Insurance in other exams

The same ground in other exams, if you are preparing for more than one or want another angle on it.

Employees' Pension Scheme and Deposit Linked Insurance: frequently asked questions

What is the difference between EPF and EPS?

EPF is a provident fund built from the employee's 12% and the employer's 3.67%, paid as a lump sum with interest. EPS is a pension scheme funded by the employer's 8.33% on wages up to ₹15,000 (plus the Central Government's share) and paid as a monthly pension. The employee does not contribute separately to EPS.

Who is eligible for a pension under the Employees' Pension Scheme?

A member of the EPF who has at least 10 years of eligible service gets a pension at age 58. Early pension is allowed from age 50 with a reduction for each year short of 58. Widow, children and orphan pensions are paid to family members when the member dies.

How much does EDLI pay on death of an employee?

The nominee gets 35 times the average monthly wages of the last 12 months (wages capped at ₹15,000), plus 50% of the average PF balance of those 12 months, with the bonus capped at ₹1,75,000. The maximum is ₹7,00,000. Where the member had continuous service of at least 12 months in the same establishment or with one or more employers, the minimum is ₹2,50,000.

Does the employee pay anything for EDLI?

No. The employer alone contributes 0.5% of wages up to the ₹15,000 ceiling. The employee's cover depends on being a member of the provident fund and on dying while in service.