Higher EPS pension calculator: How to use it, calculate the amount payable for higher pension Once the amount is known, it will make easier for him/her to evaluate the pros and cons of opting for it
The Employees’ Provident Fund Organisation (EPFO) has finally released an Excel-based calculator for employees who want to opt for a higher pension from the Employees’ Pension Scheme (EPS).The calculator helps an employee to estimate the amount of money he/she has to pay now if they opt for a higher EPS pension before the deadline of July 11, 2023. To be eligible for a higher pension on the basis of actual salary, the contribution in EPS should also be done on the basis of actual salary not only in future but also in the past. As the employees are opting for a higher pension now, they are required to pay the difference between the amount already deducted towards EPS and the higher deduction on the basis of actual salary since it exceeded the wage ceiling limit or from the date of joining the EPS scheme - whichever is later.
How to use EPFO’s Excel calculator
Before using this calculator, an employee must keep all his salary slips (from the date of joining the EPS scheme) handy. This is because the calculator asks an employee to manually enter his/her wage details on a monthly basis. Under the EPF laws, basic salary and dearness allowance (if any), are considered as ‘salary’ for the purpose of monthly contributions to the EPF and EPS accounts.
Hence, from your salary slips, an employee must enter the basic salary details manually in the Excel calculator. Once the details are entered, the calculator automatically makes other calculations, i.e., additional 1.16% contributions from September 1, 2014, on wage above Rs 15000 and interest accrued on missing EPS contributions etc.
Here we have taken an example of how EPFO’s Excel calculator for higher pension works. Suppose you joined the job and became a member of EPF and EPS in June 2010 with a basic salary of Rs 10,000 per month. Further, it is assumed that your basic salary is hiked by 15% every financial year. As the basic salary is hiked every year, the contribution to the EPF and EPS accounts will also vary. Till August 2014, the wage ceiling in the EPF scheme was Rs 6,500. Hence, from June 2010 to August 2014, the contribution made to the EPS account will be 8.33% of the actual basic salary instead of the wage ceiling limit (Rs 6,500).
Since 8.33% of the prevailing wage ceiling of Rs 6500 would have already been contributed, therefore, once the wage details are entered, it will show the additional contributions and accrued interest till March 31, 2023, that is payable in the EPS account.
From where and how to start inputs details
From the screenshot shared below, an employee is required to mention the details in the tab ‘Wage Entry’. Once the wage details are entered, based on the actual salary and wage ceiling limit as applicable, the Excel calculator will automatically calculate the missing contribution amount due and accrued interest at the historical EPF interest rate.
(Screenshot from the Excel calculator)Once the wage details are mentioned till the date of retirement or till February 2023 (the calculator allows till this date only), it automatically calculates the amount that one needs to pay in the EPS account. This is reflected in the calculator sheet (8.33%). You can also refer to the ‘Summary 8.33%’ sheet for easier reference to the amount payable in the EPS account.
(Screenshot from the Excel calculator)Do note that the Excel calculator makes the calculation till FY 2022-23 for the amount deposited in the EPF account till March 31, 2023. It shows the total amount that one needs to pay till FY 2022-23 and the additional amount that they need to pay for the current financial year (2023-24), depending on the date of the payment. Do note that the amount payable for the current financial year may change depending on the amount deposited in the EPS account. The final amount that actually will be payable to you will be informed to you by the EPFO once they have verified your application form.
Additional 1.16% contribution to the EPS account
On May 3, 2023, the government issued a notification clarifying that an additional 1.16% contribution to the EPS account (over and above the wage ceiling level - currently Rs 15,000 per month) will be made from the employer’s contribution to the EPF account. The additional contribution will be made from September 1, 2014, to till date/ retirement date- whichever is earlier.
Do note that in 2014 the EPFO demanded that employees opting for the higher pension should pay an additional contribution of 1.16% over and above the wage ceiling level from their own salary. However, this was struck down by the Supreme Court in its judgment dated November 4, 2022. The court asked the EPFO to devise an alternative mechanism for the additional 1.16% contributions. As a result, employees are no longer required to pay this but it is deducted from the employer’s contribution.
Based on the wage details manually entered by you, the Excel calculator automatically calculates the additional 1.16% contribution that will be taken from the EPF account to the EPS account.
Do note that the missing contributions along with the interest paid on these 1.16 % contributions and excess deposits made to the EPF account will be recovered from the EPF account if it has sufficient balance. This will be shown in the Excel spreadsheet.
(Screenshot from Excel on Summary 1.16%)Hence, the total amount that will be payable by you, if you opt for a higher pension, will be equal to the total from Summary 8.33% and Summary 1.16%. From our example, an individual will need to pay Rs 286027 (258939+27088).
Don’t miss out on ET Prime stories! Get your daily dose of business updates on WhatsApp. click here!
This story originally appeared on: India Times - Author:Faqs of Insurances
