If you are a salaried employee, these new EPF rules are important for you.
Until now, nearly 80 million members of the Employees’ Provident Fund Organisation (EPFO) had to contribute 12% of their basic salary to the Employees’ Provident Fund (EPF).
Employers were also required to contribute the same amount.
However, on June 29, the central government notified the new Employees’ Provident Fund Scheme, 2026, replacing the old EPF Scheme of 1952.
Under the new rules, the mandatory employee contribution has been clearly linked to the statutory salary limit of ₹15,000.
This means employers are now legally required to deduct only 12% of ₹15,000, which comes to ₹1,800, as the EPF contribution.
Employees who want to save more for retirement can still contribute more than ₹1,800 voluntarily.
However, employers are not required to match this extra contribution unless they have agreed to do so through an employment contract or company policy.
In simple terms, employers are now legally required to contribute only ₹1,800 per month, regardless of how much the employee contributes above that amount.
The new scheme also introduces stricter timelines for claim settlements. PF withdrawals, pension claims, and insurance claims must be processed within 20 days.
If there is an unnecessary delay, the commissioner can take action, and the employer may have to pay 12% annual interest as a penalty.
Higher In-Hand Salary, But Lower Retirement Savings
One of the biggest effects of the new rules is that employees may receive a higher monthly take-home salary. However, this could also reduce their retirement savings if they choose to lower their EPF contributions.
Employees who continue making higher voluntary contributions can still build a larger retirement fund, but those who reduce their contributions may accumulate much less by retirement.
1. How Will Employees Be Affected?
At present, many companies deduct 12% of an employee’s basic salary towards EPF. For example, if someone’s basic salary is ₹30,000, the EPF deduction is ₹3,600.
Under the new rules, only ₹1,800 is mandatory. The remaining ₹1,800 becomes optional.
If both the employee and the employer agree, this extra amount can be paid as part of the employee’s salary instead of being deposited into the EPF account.
However, this will not happen automatically. It will depend on the company’s policy and mutual agreement between the employer and the employee.
2. Will Companies Stop Contributing More Than ₹1,800?
Legally, employers now have to contribute only ₹1,800 per month. Any contribution above that amount is voluntary and depends on the company’s policy and the employee’s choice.
This does not mean every company will immediately reduce its contribution. Many employers may continue following the existing system to attract and retain employees. Each company will decide its own approach.
3. Why Has the Government Made This Change?
According to the government, the aim is not to generate more revenue but to simplify the EPF law.
The earlier EPF Scheme was introduced in 1952, and the government wants to update it to match the new labour laws. The revised scheme is expected to make the rules clearer, reduce paperwork, and help lower disputes related to EPF.
4. How Will Companies Benefit?
For most companies, the new rules provide greater flexibility.
Employers that were contributing 12% of higher salaries can now legally limit their EPF contribution to ₹1,800 if they choose.
This can reduce their financial and legal burden while giving them more freedom to design salary structures.
Because of this, the change is generally seen as beneficial for employers.
5. What Will Be the Impact on Retirement Savings?
If an employee contributes only ₹1,800 every month to the EPF, the retirement corpus is likely to be much smaller than before.
EPF currently offers an interest rate of around 8.25%, and higher contributions help generate larger long-term savings through compounding.
Employees who continue contributing more voluntarily can still build a strong retirement fund.
However, those who reduce their contribution simply to receive a higher in-hand salary may end up with much lower savings after retirement.
6. Will Salary Structures Change?
The biggest changes are likely to be seen in companies that offer a fixed Cost to Company (CTC) package.
In such cases, employers and employees may mutually decide to reduce EPF deductions and add the remaining amount to the employee’s monthly salary or other allowances.
This could increase the in-hand salary but reduce the amount saved for retirement.
These changes are unlikely to happen immediately across all companies. Different employers may adopt different approaches over time based on their own policies.
