What is the EPS Higher Pension Scheme?

It is an option introduced by EPFO allowing employees to contribute to the Employees' Pension Scheme (EPS) based on their actual basic salary rather than the statutory wage ceiling of ₹15,000.

Who is eligible for the higher pension?

Eligible members are employees who were members of the EPF/EPS before September 1, 2014, and continued to be members on or after that date, and whose employers contributed on actual wages exceeding the ceiling.

How is the employer contribution split under the higher pension option?

The employer contributes **8.33%** of actual basic salary to the EPS (pension fund) and the remaining **3.67%** to the EPF (provident fund). An additional **1.16%** is diverted to the pension fund on wages exceeding ₹15,000.

What is retroactive diversion?

It is the transfer of the difference in employer contributions (actual wages vs standard limit) from the employee's EPF account to the EPS pension fund, dating back to September 1, 2014, or their date of joining.

How do you configure higher pension splits in Tally Prime?

Update the EPF and EPS pay heads in Tally Payroll. Set the employer pension contribution formula to 8.33% of actual basic salary instead of capping it at ₹15,000.

EPS Higher Pension Scheme: Rules & Calculation

Managing employee payroll in India involves complying with Employees' Provident Fund Organisation (EPFO) rules.

Following the Supreme Court judgment, EPFO introduced the **EPS Higher Pension option**, allowing employees to contribute to their pension based on actual wages rather than the statutory wage ceiling.

1. EPS Contribution Splits & Wage Ceilings

Under normal and higher pension options, employer contributions are split differently:

Contribution Parameter	Standard Pension Scheme	Higher Pension Scheme Option
EPS Wage Ceiling Limit	Capped at ₹15,000 per month	Actual basic salary (no statutory cap)
Employer EPS Contribution	8.33% of ₹15,000 = ₹1,250 per month	8.33% of actual basic salary
Additional EPS Diversion	Nil	1.16% of actual basic salary exceeding ₹15,000
Employer EPF Contribution	Remaining portion (12% of wage - ₹1,250)	Remaining portion (12% of actual basic - EPS diversion)

2. Case Study: Higher Pension Monthly Contribution

Let's compute the monthly contribution for an employee with a basic salary of **₹80,000**:

Actual Basic Salary: ₹80,000 per month (exceeding the standard ₹15,000 ceiling).
Employer EPS Pension Contribution (8.33%): ₹6,664
EPS Contribution = 8.33% of ₹80,000 = ₹6,664
Additional Pension Diversion (1.16% on excess): ₹754
Additional Diversion = 1.16% of (₹80,000 - ₹15,00,00) = 1.16% of ₹65,000 = ₹754
Total Monthly EPS Contribution: **₹7,418** (credited to the pension fund)
Employer EPF Contribution: **₹2,182** (calculated as 12% of ₹80,000 (₹9,600) minus the ₹7,418 EPS diversion, credited to the provident fund).

Entry: Monthly Payroll Voucher (F5 Payment/F7 Journal)
Debit:  Employer EPF Contribution Expense ₹2,182
Debit:  Employer EPS Contribution Expense ₹7,418
Credit: EPFO Payable Ledger                       ₹9,600

3. Retroactive Fund Diversions and Interest Calculations

Employees opting for the higher pension must transfer the difference in employer contributions (actual wages vs standard limit) from their EPF account to the EPS pension fund retroactive to September 1, 2014, or their date of joining.

The EPFO calculates these differences along with the historical interest declared u/s EPF rules each year. The cumulative amount is diverted to the pension fund, which reduces the employee's PF balance while increasing their future pension.

4. Configuring Payroll Pay Heads in Tally Prime

To manage higher pension splits natively in Tally:

Tally Payroll Configuration:

Go to **Gateway of Tally > Alter > Pay Head > Select EPS Employer Contribution**.

Set the calculation type to **As Computed Value** and modify the formula to 8.33% of basic salary, removing the standard ₹15,000 cap. Tally will automatically calculate the correct splits during monthly payroll runs.

Stop typing invoices manually into Tally: Skip the manual data entry. Just upload your purchase bill PDFs or images, review the extracted values, and sync them directly to Tally Prime in a few clicks with TrulyInvoice. Keep your books audit-ready without the typing.