EPF vs EPS vs Gratuity — Understanding the Difference

As a salaried employee in India, you're entitled to three major retirement benefits: EPF (Employees' Provident Fund), EPS (Employees' Pension Scheme), and Gratuity. While all three are linked to your employment, they work very differently in terms of contribution, eligibility, and payout.

This guide explains each one clearly and compares them side by side so you know exactly what you're getting.

For a deeper dive into EPF vs EPS specifically, see our detailed EPF vs EPS guide.

Quick Comparison Table

EPF (Employees' Provident Fund) — Explained

EPF is a savings scheme where both you and your employer contribute 12% of your basic salary + DA every month. Your entire 12% goes into EPF, while from your employer's 12%, only 3.67% goes to EPF (the rest goes to EPS).

Key Points:

• Your money grows at ~8.25% annual interest (set by EPFO yearly)
• You can withdraw partially for home purchase, medical emergency, marriage, education (with conditions)
• Full withdrawal allowed after 2 months of unemployment or at retirement (age 58)
• Tax-free if you withdraw after 5 years of continuous service
• Check your balance anytime on the EPFO portal or via UAN

EPF Calculation Example:

If your basic salary is ₹30,000/month:

• Your EPF contribution: ₹3,600/month (12%)
• Employer's EPF contribution: ₹1,101/month (3.67%)
• Total monthly EPF deposit: ₹4,701
• With interest, this grows significantly over 20-30 years

For withdrawal steps, see our PF withdrawal guide.

EPS (Employees' Pension Scheme) — Explained

EPS is a pension scheme funded entirely by your employer's contribution. From the employer's 12%, 8.33% goes to EPS (capped at ₹15,000 basic salary, meaning max ₹1,250/month goes to EPS).

Key Points:

• You don't contribute anything to EPS directly
• Minimum 10 years of service required to get monthly pension
• Pension starts at age 58 (or early pension at 50 with reduced amount)
• Pension amount depends on years of service and average salary of last 60 months
• If service is less than 10 years, you can withdraw the EPS corpus as a lump sum

EPS Pension Calculation:

Monthly Pension = (Pensionable Salary × Years of Service) / 70

Example: If pensionable salary is ₹15,000 and service is 25 years:

• Pension = (15,000 × 25) / 70 = ₹5,357/month

EPS Withdrawal (Less than 10 Years):

If you leave employment before completing 10 years, you can withdraw your EPS balance using Form 10C through the EPFO portal.

Gratuity — Explained

Gratuity is a lump sum payment made by the employer as a reward for long and continuous service. Unlike EPF and EPS, there's no monthly deduction — the employer pays it from their own funds when the employee leaves.

Key Points:

• Minimum 5 years of continuous service required (exception: death or disability)
• No employee contribution — it's entirely the employer's cost
• Applicable to establishments with 10 or more employees
• Paid on resignation, retirement, superannuation, or death
• Tax-free up to ₹20 lakh for private sector employees (entire amount tax-free for government employees)

Gratuity Calculation:

For employees covered under the Gratuity Act:

Gratuity = (Last drawn salary × 15 × Years of service) / 26

Where:

• Last drawn salary = Basic + DA
• 15 = deemed number of working days per half-month
• 26 = working days in a month
• Years of service rounded to nearest full year (5 years 7 months = 6 years)

Example: Basic + DA = ₹40,000, Service = 15 years

• Gratuity = (40,000 × 15 × 15) / 26 = ₹3,46,154

When Is Gratuity Forfeited?

Gratuity can be partially or fully forfeited if the employee is:

• Terminated for riotous or violent behaviour
• Terminated for an offence involving moral turpitude during employment

Note: Resignation or normal termination does not forfeit gratuity as long as 5 years are completed.

When Do You Get Each Benefit?

Tax Comparison

Important Tips

1. Don't withdraw EPF early — you lose compounding benefits and tax-free status
2. Transfer EPF when changing jobs using UAN — don't create a new account, or EPS years won't count
3. Gratuity is your right — employers cannot deny it if you've completed 5 years. File a complaint at the Labour Commissioner's office if denied
4. EPS pension is low — it's capped at ₹15,000 basic. Don't rely on it as your only retirement income
5. Gratuity is separate from notice period — even if you don't serve notice, you're entitled to gratuity

Frequently Asked Questions

Is gratuity deducted from my salary?

No. Gratuity is paid entirely by the employer. It is not deducted from your salary unlike EPF.

Can I get EPF, EPS, and Gratuity all at once?

Yes. When you resign or retire after sufficient service, you receive EPF (lump sum), gratuity (lump sum), and become eligible for EPS pension (monthly, from age 58).

What if my employer doesn't pay gratuity?

File a complaint with the Controlling Authority under the Payment of Gratuity Act (usually the Labour Commissioner). You can also file online at labour.gov.in.

Is gratuity applicable in private companies?

Yes. Any establishment with 10 or more employees must pay gratuity under the Payment of Gratuity Act, 1972.

Can I get EPS pension and EPF withdrawal together?

Yes. EPF is your savings account (lump sum). EPS is your pension (monthly). They are independent — you get both.

How do I check my EPF and EPS balance?

Log in to the EPFO Member Portal using your UAN. Your passbook shows both EPF and EPS contributions separately.

Is there a maximum limit on gratuity?

The tax-free limit is ₹20 lakh. However, employers can pay more — the excess above ₹20 lakh is taxable.

Disclaimer: CitizenNest is an independent platform not affiliated with EPFO or any government body. For official information, visit epfindia.gov.in and labour.gov.in.