A few news reports and social media posts recently claimed that the new Employees' Provident Funds (EPF) Scheme, 2026 has made provident fund contributions above ₹1,800 a month voluntary. The impression was that employees can now reduce their PF deductions and take home a higher salary.
That, however, is not a new rule. It has always been the case.
On 29 June, the government notified three schemes under the Code on Social Security, 2020: the Employees' Provident Funds Scheme, 2026 (replacing the EPF Scheme, 1952), the Employees' Pension Scheme, 2026 (replacing the EPS, 1995), and the Employees' Deposit-Linked Insurance Scheme, 2026 (replacing the EDLI Scheme, 1976).
The notifications modernize the legal framework governing the Employees' Provident Fund Organisation (EPFO). While they simplify several procedures and introduce new administrative provisions, the core architecture of EPF remains largely unchanged.
Here's what subscribers need to know.
What hasn't changed
EPF contributions remain exactly the same. Employees continue to contribute 12% of their basic salary to EPF, with employers matching the contribution. However, this mandatory contribution applies only up to the wage ceiling notified by the central government under the Code on Social Security, 2020. The ceiling currently stands at ₹15,000 a month, making the mandatory contribution ₹1,800 (12% of ₹15,000).
If your basic salary exceeds ₹15,000 a month, you have always had two choices: contribute PF on your actual basic salary or restrict it to ₹1,800 a month. Employers too can restrict their contribution to ₹1,800 even if the employee chooses to do it on actual basic salary. The new scheme merely reiterates this position. It does not introduce any fresh option to reduce PF contributions.
"The only substantive drafting change is that the scheme no longer mentions ₹15,000 explicitly. Instead, it refers to the 'wage ceiling notified by the central government'. This allows the government to revise the wage ceiling through a notification without amending the scheme itself," said Ketan Das, PF Business Head at FinRight, a provident fund startup.
This means that if the government decides to raise the wage ceiling to ₹21,000, as has been under discussion, it would only require a notification instead of another amendment to the scheme.
Why do most employees still contribute PF on their full basic salary if it has always been optional? The answer lies in payroll practices. Most employers enrol all employees under a uniform PF policy instead of offering different contribution options.
"Employers should ideally explain these choices on the joining day, but they often don't. Maintaining one payroll system for everyone is administratively simpler, so even employees who request lower contributions may not get that option," Das said.
Similarly, many first-time employees are unaware that if their basic salary exceeds ₹15,000 on the date they join their first eligible establishment, they may choose not to become EPF members, subject to the EPF rules and their employer's policies.
Should you now ask your HR department to reduce your PF contribution? Not necessarily.
Consider an employee whose basic salary is ₹1 lakh a month, with both the employee and employer contributing ₹12,000 each to EPF. If both contributions are restricted to ₹1,800 instead, the remaining ₹20,400 ( ₹24,000 minus ₹3,600) would typically become part of the employee's taxable salary. While this would increase monthly take-home pay, it would also raise taxable income and reduce retirement savings.
What has changed
1. EPFO gets a new legal structure
According to Kunal Kabra, co-founder of fintech startup Kustodian.Life, the biggest change is structural rather than operational.
"With these notifications, the Code on Social Security, 2020 has finally gone live for the provident fund ecosystem. The new schemes are subordinate legislation under the Code, which places EPFO within a unified labour law architecture with common definitions of wages, enforcement mechanisms and coverage thresholds," he said.
"Read together with the fully digital framework these schemes mandate, the 2026 notifications are less a final settlement of rules and more a chassis on which the next decade of social security policy can be delivered by simple notification."
2. Partial withdrawal rules have been simplified
One of the biggest changes for subscribers is the simplification of EPF advance withdrawals. Instead of more than a dozen separate withdrawal provisions, the new scheme groups advances into three broad categories—essential needs, housing and special circumstances.
The scheme also introduces a new structure for maintaining members' balances.
"EPFO will now maintain two buckets within a member's PF account. At least 25% of the balance will remain protected as the minimum balance, while up to 75% can be accessed through partial withdrawals. Earlier, permissible withdrawal amounts differed for different reasons. Now it is the same for the three categories," Kabra explained.
The scheme also prescribes how often withdrawals can be made under different categories—for instance, up to 10 withdrawals for education, five for marriage of self or family members, and two every year under the special circumstances category.
3. Uniform 12-month service requirement
The new scheme also standardizes the minimum service requirement for advance withdrawals. Earlier, the qualifying period depended on the purpose of withdrawal. Under the new framework, members need to complete 12 months of service before becoming eligible for advances.
"The biggest impact is on medical withdrawals. Earlier there was no minimum service requirement for medical emergencies. Members will now have to complete 12 months of service," said Das.
4. Longer wait before final PF withdrawal
Another major change relates to employees who leave their jobs. Until now, subscribers could withdraw their entire EPF balance after remaining unemployed for two months. The new scheme extends this waiting period to 12 months.
"As we understand, only full withdrawal has been restricted to 12 months. Partial withdrawals will still be allowed during this window," said Das.
For EPS, the waiting period is even longer at 36 months. "Since eligibility for EPS and related benefits is examined only at the time of final withdrawal, extending the waiting period after quitting one's last job could make it harder for members to obtain employer support if discrepancies arise," Kabra said.
He also questioned the different timelines for EPF and EPS. "Having a 12-month waiting period for EPF and 36 months for EPS will only make the process more confusing for subscribers," he said.
Citing exceptions, Anurag Jain, co-founder and partner at ByTheBook Consulting LLP, said women who resign for the purpose of marriage and subscribers moving abroad can withdraw their entire balance immediately after leaving their job. They do not have to wait for 12 months.
5. Faster claim settlement, with accountability
The new scheme seeks to make EPFO more accountable by clearly stating that claims should be processed within 20 days. If an eligible claim is delayed beyond the prescribed timeline without sufficient reason, the Regional Provident Fund Commissioner concerned can be held personally liable.
The scheme provides for penal interest at 12% a year to be recovered from the erring officer's salary for the period of unjustified delay.
6. Nomination goes fully digital
The scheme formally recognizes online nominations, replacing the earlier paper-based process under Form 2.
"Employees earlier filled Form 2 when they joined an organization and later updated nominees through the EPFO portal. The 2026 scheme formally incorporates the digital nomination process into the legal framework," said Jain.
What about EPS and EDLI?
For most subscribers, there are no major changes in benefits under the Employees' Pension Scheme, 2026 or the Employees' Deposit-Linked Insurance Scheme, 2026.
However, Das believes the wording of the EPS scheme strengthens the view that EPS contributions above the notified wage ceiling may no longer be permissible.
"The scheme clearly states that contributions above the wage ceiling notified by the central government will flow into EPF. In my reading, it effectively puts a full stop to any possibility of higher-pension contributions," he said.