It is never too early to start your retirement planning. Here’s how you can get the most bang for your pension buck.

4 Ways to get the most out of your pension contributions

Saving up for one’s sunset years is a crucial life-stage goal. It has to be carefully planned and executed over many decades. Considering factors such as improved healthcare and increasing lifespans, rising levels of inflation, and limited social security options for senior citizens, it is imperative that one starts planning for their retirement from an early age.

One of the best ways to generate a consistent income post retirement is to maximise your pension. Salaried employees who have completed 10 years or more of service are eligible to receive a monthly pension under the Employees' Pension Scheme (EPS) in addition to the Employees' Provident Fund (EPF) and enhance their retirement benefits. 

1. How to maximise your pension

As you may know, your employer makes a 12% contribution of your basic salary towards social security schemes. While 3.67% of this goes towards the EPF scheme, the remaining 8.33% goes towards pension contributions in the EPS. While employees have the choice to opt out of the scheme, it is recommended that they match the employer’s contribution to enhance their post-retirement receivables.

Until recently, there was a cap of Rs 15,000 on EPS, which the Supreme Court did away with in 2019. EPF is now calculated as follows:

EPF (monthly pension) = last drawn salary x number of years of service ÷ 70

For example, a person who completed 25 years of service and last drew a salary of Rs 50,000 would be eligible for a pension of Rs 17,857 (50,000 x 25÷70). However, if they wish to receive a higher pension, they will have to redirect a higher portion of their contribution from the EPF corpus to EPS.

2. How to avail of tax exemption on your pension

In some cases, a lump sum benefit also known as a commutable pension may be exempt from tax. This is applicable for:

  • Central/State government employees
  • Defence personnel
  • Non-government employees (50% exemption)
  • Non-government employees receiving gratuity (33% exemption)

Pension received on a regular basis, also known as uncommuted pension, is taxed just as salary income. If the total income is above the exemption limit, you will have to pay income tax on the income post retirement. However you can reduce your taxable income up to Rs 1.5 lakh by making tax deductible investments under Section 80C. You can also claim an additional Rs 50,000 under Section 80CCD(1) by making a contribution to your pension through the National Pension Scheme (NPS – Tier 1).

3. How to check your EPS balance

As a subscriber, you can check your EPS balance on the website of the Employees Provident Fund Organisation (EPFO). Just log in with your Universal Account Number (UAN), password, and captcha details. Then click on your specific member ID and check the total pension contribution under the ‘Pension Contribution’ column. The statement will give you a complete breakdown of contributions made month-wise by both employer and employee, as well as details on withdrawals (if any).

4. How to withdraw pension contribution in EPF

If an individual has not completed 10 years of service and is still employed, they will not be able to make a withdrawal from their pension funds. However, if they are in between jobs or unemployed, they can make partial withdrawals (PF balance + EPS amount) using Form 10C via the EPFO portal.

Those who have completed 10 years of service and are above the age of 50 will be given a certificate of pension, and are eligible to make withdrawals (PF balance + reduced pension) using Form 10D. 

For subscribers above the age of 58, a complete withdrawal of PF balance and pension can be made using Form 10D. The same form can also be used by the nominee/widow/children of the subscriber (if deceased).

A subscriber can submit their withdrawal online via the EPF Member e-Sewa portal or visit the regional EPFO office with the requisite form and the Aadhaar-linked composite claims form. 


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