Good news for EPF Scheme subscribers! The Central Board of Trustees (CBT) of the Employee Provident Fund has approved a proposal for the restoration of commuted value of the pension to the Pensioners after 15 years of drawing commutation under the EPS 1995 scheme.
EPS Pension – Latest Amendment
The EPF members can opt for 1/3 rd of EPS Pension as commutation. Also, the latest amendment seeks the restoration of commuted value of the pension to the Pensioners after 15 years of drawing commutation under the EPS 1995 scheme.
Meaning, the latest amendment seeks to restore the original amount of pension after 15 years equal to the same amount as it would have been without commutation. Let us consider your monthly pension is Rs.15,000 (fixed after calculation), then the commutation is allowed on 1/3 of such pension.
Hence, 1/3 of your monthly pension is Rs.5,000 (Rs.15,000/3).
The yearly pension amount comes to Rs 60,000 (5,000*12). The commuted value of pension for 15 years is Rs 9,00,000 (60,000*15).The EPF member can make advance lump-sum withdrawal of Rs 9 lakh and he/she will get reduced pension of Rs 10,000 (2/3rd of Rs 15,000) as monthly pension for 15 years.
After 15 years, the monthly pension amount will again be restored to Rs 15,000.
Should you go for EPS Pension Commutation?
If you are a pensioner now, should you opt for Commutation of EPS pension?
The Commutation of Pension may appear to be a better option, if you are in in a position to deploy the funds (lump-sum withdrawal) on your own for much better returns. It can also be beneficial to meet any important financial obligations that you may have at the time of retirement.
If you opt for commutation of EPS pension, you get a lump-sum amount but reduced pension is payable every month for the next 15 years. However, your pension amount gets restored after 15 years. So, you need to consider ‘opportunity cost’ and inflation rate before you take final decision.
I believe that 1/3 rd of total pension that is commuted is a tax-free amount in the hands of Pensioners.
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