It is no longer necessary to pay 12% of the basic amount in EPF: ₹ 1,800 limit fixed in the new rule; Employees and companies can continue 12% contribution as per their wish.

If you are a salaried employee, then this news is for you. Till now, around 8 crore employees of EPFO ​​(Employees Provident Fund Organization) had to contribute 12% of their basic salary and it was mandatory for the company to contribute the same amount. But, the Center notified the new Employees Provident Fund Scheme, 2026 on June 29.

It has replaced the old EPF Scheme, 1952. Under this, the mandatory employee contribution has been clearly linked to the statutory salary limit of Rs 15,000. This means that now it is necessary for companies to take only 12% of Rs 15,000 i.e. Rs 1,800 as EPF contribution. Contribution above Rs 1,800 can continue only if the employee wishes to do so voluntarily.

If you want to save more for your retirement fund, you can continue to contribute more than Rs 1,800 to EPF. Importantly, it is not mandatory for companies to match this additional voluntary contribution unless they have agreed to do so under an employment contract or company policy.

This means that whatever the employee’s contribution to EPF, companies will be legally bound to contribute only Rs 1,800 to EPF. Apart from this, PF withdrawal, pension or insurance claim will have to be settled within 20 days. In case of delay without any concrete reason, action will be taken against the Commissioner and penal interest of 12% per annum will have to be paid, which will be deducted from the salary of the officer.

The advantage is that in-hand salary may increase, but the disadvantage is that ‘savings’ will decrease.

1. What will be the direct impact on employees? Will the excess deducted from salary now be available?

Presently most of the companies used to deduct 12% of basic salary in PF. Suppose the basic salary is Rs 30,000, then currently Rs 3,600 was deducted. After the new rule, only Rs 1,800 need to be deducted from this. The remaining Rs 1,800 is now a matter of ‘will’, that is, if both the employee and the company agree, then this amount can be added to the salary received instead of PF. But this will not happen automatically, for this company policy and mutual consent is necessary.

2. Will companies stop paying the 12% contribution? Will that money now be added to the salary?

The company also now has a legal obligation to pay only Rs 1,800. Paying more than this is at the discretion of the company and the employee; no law forces them to do so. But this does not mean that all companies will immediately stop contributing more. Many companies may also continue the old system to retain employees. Every company will take its own decision.

3. How will the government benefit from this change?

The aim of the government is not to earn money, but to make the old and complicated PF law (which was in force since 1952) clean in accordance with the new labor laws. This will clarify the rules, reduce paper work and disputes related to PF are expected to reduce.

4. Will companies benefit or suffer loss from this?

This is a matter of advantage for most companies. The companies which were deducting PF at the full rate of 12% even on high salaried employees, can now deduct Rs 1,800 if they wish. May be limited to. The legal burden on them will be less. There will be more freedom in making salary structure. There doesn’t seem to be any harm in this.

5. How will a contribution of Rs 1,800 in EPF affect the future savings of employees?

If an employee deposits only Rs 1,800 per month in PF, the amount deposited till retirement will be much less than before. Good interest is available on PF (about 8.25%), and the larger the amount, the greater the benefit. Yes, employees who wish can continue to deposit the same amount as before. The real danger is those who, due to lack of information or greed for higher in-hand salary, will opt for less PF contribution. They will get very less amount at the time of retirement.

6. What changes can be seen in the salary structure?

Especially changes can be seen in those companies which give fixed complete package of salary (CTC). It is possible that the company and the employee may decide together that instead of deducting more PF, that money should be added to the salary or other allowances received in-hand. Due to this, the monthly salary may increase slightly, but the money saved for retirement may reduce. This change will not happen everywhere simultaneously, but gradually and in different ways in different companies.

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