The Employees’ Provident Fund Organization (EPFO) has stated that the mandatory PF contribution for employees is limited to a maximum of Rs 1,800 per month, any contribution above this amount will be completely voluntary. This new “Employees’ Provident Fund Scheme, 2026” will affect around 80 million active EPFO subscribers. As per the EPFO, employees will be required to contribute 12 per cent of their salary, up to the statutory salary limit of Rs 15,000 per month. This will translate to a mandatory EPF contribution of Rs 1,800 a month.
What exactly has changed?
To understand the change, let’s look at an example. Suppose an employee’s basic salary is Rs 15,000 per month; a person will contribute 12 per cent of this amount, i.e. Rs 1,800. Nothing changes here.
However, if an employee’s basic salary is Rs 1,00,000, many employers currently deduct Rs 12,000, i.e., 12 per cent of the basic salary. Under the new scheme, the mandatory PF deduction will remain at just Rs 1,800, and the remaining Rs 10,200 will be voluntary.
The company will also be required to make a mandatory contribution of Rs 1,800, matching the employee’s contribution under this scheme. This rule will increase the take-home pay of employees who choose not to have PF deducted on their entire basic salary, as the mandatory PF deduction from their salary will now be reduced.
What if an employee is contributing more?
According to the new rules, any employee earning more than the 15,000 rupee salary limit can choose to contribute at the statutory rate of 12 per cent. However, the rules clearly state that companies are not obligated to match employees’ additional voluntary contributions. They are free to decide at their own discretion.
The new rules also provide that both the employee and the employer can reduce or even stop such additional voluntary contributions at any time.
This revised rule aims to simplify the process and give employees greater control over their salaries and savings. Capping the mandatory PF deduction at Rs 1,800 per month will not only leave employees with more cash to spend, but also limit companies’ mandatory PF liability under CTC.
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