Athira Sethu
Kochi, 6 July 2026
There is a new version of EPF Scheme, 2026, enacted by the Indian Government. The newly enacted EPF Scheme 2026 takes place of the old EPF scheme which was in practice since 1952.
The major change relates to the percentage of the contributions made by employees and employers every month.
EPF contribution rates remain unchanged under the new scheme. Both employees and employers will continue to make 12% of contribution to the EPF. However, the compulsory contribution under the scheme is computed with respect to the salary ceiling of ₹15,000 per month.
Hence, the compulsory contribution to EPF is ₹1,800 every month for both employee and the employer.
Under the previous rule, many employers calculated the EPF on the basis of the entire basic pay of an employee. For instance, in case the monthly basic salary of an employee is ₹60,000, the EPF contribution made by the employee is ₹7,200 and similarly by the employer.
Under this rule, it becomes voluntary. In case if both employer and the employee wish to, then they can go ahead with the increased contribution to EPF. Else, they can opt to make minimum contribution of ₹1,800.
This can result in higher salary package for the employees since now lesser amount would be deducted towards EPF.
Though, there is one drawback as well. It would lead to lesser savings in EPF for the employee as well. Those employees who wish to have higher EPF can even do so if the employers agree.
Apart from benefiting the employees, this new rule is helpful for the companies as well as they don’t have to pay the compulsory EPF. Some companies may utilize these funds to improve some other benefit packages for the employees.
Whether employees opt for less EPF contributions will be determined by their financial requirements. For people who require additional cash flow in order to settle home loans and even save up an emergency fund, opting for more money after tax deductions is advisable. In contrast, EPF is deemed one of the safest ways to retire since it is a government-backed product, enjoys tax rebates, and generates good returns. Choosing less EPF contributions will have its repercussions in the future when retiring.
The EPF Scheme 2026 has additional improvements to offer. First, EPF contributions have been simplified from many categories to just three categories. Second, the government is working towards digitizing EPF contributions for employee convenience.
