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While lower PF deductions may boost in-hand pay, experts caution that the decision should not be based solely on the prospect of a higher in-hand salary.
The Centre has notified the new Employees’ Provident Fund (EPF) Scheme, 2026, replacing the EPF Scheme, 1952. The new scheme came into effect on June 29, with its publication in the Gazette.
EPF Scheme 2026: A higher monthly salary or a larger retirement corpus? That’s the choice many salaried employees could face after the EPF Scheme, 2026, clarified that any employee provident fund contribution above the mandatory Rs 1,800 a month is voluntary. While lower PF deductions may boost in-hand pay, experts caution that the decision should not be based solely on the prospect of a higher in-hand salary.
The Centre has notified the new Employees’ Provident Fund (EPF) Scheme, 2026, replacing the EPF Scheme, 1952. The new scheme came into effect on June 29, with its publication in the Gazette.
What is the new rule?
The new rule caps the mandatory EPF deduction at Rs 1,800 per month from the employee side, which is 12 per cent of the statutory limit of Rs 15,000. Any EPF contribution above this is voluntary.
Currently, EPF is generally deducted at 12 per cent of the basic pay. Let’s say, if someone is earning a monthly basic pay of Rs 30,000, the EPF contribution will be Rs 3,600 from the gross salary. After the latest clarification under the EPF Scheme 2025, the mandatory EPF deduction will be Rs 1,800.
Will you get higher take-home salary?
Rohitaashv Sinha, partner at King Stubb & Kasiva, Advocates and Attorneys, said, said the proposal to make EPF contributions above the prescribed mandatory threshold voluntary is aimed at giving employees greater flexibility in managing their monthly cash flow. An employee may be able to opt for lower EPF contributions, which could increase their take-home salary. However, this would not automatically entitle an employee to unilaterally direct the employer to reduce PF deductions.
Sinha said any change in EPF contributions must be implemented only in accordance with the final statutory framework and applicable compliance requirements.
“Any change in EPF contributions would have to be implemented strictly in accordance with the final statutory framework, the applicable EPF rules, and the employer’s payroll and compliance processes. Employers will need to ensure that any reduction in contributions is legally permissible, properly documented, and does not result in non-compliance with mandatory social security obligations,” he said.
In other words, even if employees are given the option to reduce voluntary contributions, employers will have to ensure that any such change complies with EPF regulations and internal payroll processes.
According to a Business Today report citing Siddharth Maurya, founder and managing director of Vibhavangal Anukulakara, the scheme does not reduce EPF contributions automatically but changes the framework governing them. Employees earning well above the wage ceiling are legally required to contribute only Rs 1,800 each from both employer and employee, unless higher contributions are chosen voluntarily. This opens the possibility of salary redesign, particularly in organisations where compensation is structured on a cost-to-company (CTC) basis.
Should you reduce your PF contribution?
While opting for lower EPF contributions could increase monthly disposable income, Sinha cautioned that employees should carefully consider the long-term financial impact before making such a decision.
“Employees should also consider the long-term implications before opting for lower contributions. While a higher in-hand salary may provide immediate financial relief, it could significantly reduce retirement savings, the benefit of compound interest on EPF accumulations, and the overall social security cushion available after retirement,” Rohitaashv Sinha said.
He added that the practical impact of the proposal will ultimately depend on the final version of the scheme notified by the government. “The ultimate impact will depend on the final contours of the scheme once officially notified by the government.”
About the Author
Haris is Deputy News Editor (Business) at news18.com. He writes on various issues related to personal finance, markets, economy and companies. Having over a decade of experience in financial journalis…Read More
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