Mandatory PF capped at ₹1800! Will Your in hand salary increase?

The government has notified the Employees' Provident Funds (EPF) Scheme, 2026, bringing significant changes for nearly eight crore active EPFO subscribers. One of the biggest takeaways is that the mandatory employee provident fund (PF) contribution remains capped at ₹1,800 per month, equivalent to 12% of the statutory wage ceiling of ₹15,000. Even if an employee earns a basic salary of ₹1 lakh a month, the compulsory contribution remains ₹1,800, while any amount above this will be treated as voluntary.

The new scheme, notified under the Code on Social Security, 2020, seeks to simplify provident fund rules, modernise compliance and provide greater flexibility without diluting retirement benefits.

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What exactly has changed?

The EPF Scheme, 2026 explicitly links the mandatory employee contribution to the statutory wage ceiling of ₹15,000. Employers are required to deduct 12% of ₹15,000, translating into a compulsory contribution of ₹1,800 every month.

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Employees who wish to save more for retirement can continue contributing beyond this limit through Voluntary Provident Fund (VPF). However, unlike the statutory contribution, employers are not legally required to match these additional voluntary contributions unless such a commitment forms part of the employment contract or company policy.

Will employees really get more in hand?

The clarification has prompted many salaried employees to wonder whether the lower mandatory contribution could increase their monthly take-home salary. Experts, however, say the answer depends on how individual employers structure salaries and administer EPF contributions.

Germaine Pereira, Partner at Solomon & Co., said the notification clearly states that employer and employee contributions remain fixed at 12% of the prescribed wages, while any contribution beyond the statutory amount becomes voluntary.

"The notification is very clear that the contribution has to be made at the rate of 12% of the wages payable by the employer. What is additional is the voluntary contribution, which can go up to 100% if the employee wishes. Employees should also consider the tax implications of higher contributions under the Income Tax Act. Importantly, the employer is not bound to match any additional voluntary contribution," she said.

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Siddharth Maurya, Founder and Managing Director of Vibhavangal Anukulakara Pvt. Ltd., said the scheme does not reduce EPF contributions automatically but changes the framework governing them.

He explained that employees earning well above the wage ceiling are legally required to contribute only ₹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.

According to Maurya, employers can restructure salary components so that employees either receive a higher monthly take-home salary by limiting PF contributions to the statutory amount or continue contributing more through VPF to build a larger retirement corpus. "VPF continues to enjoy tax-efficient compounding, making it an attractive option for long-term retirement planning," he said.

Who is likely to benefit?

Employees with a basic salary of ₹15,000 or less will see no change, as their EPF contribution already corresponds to the statutory wage ceiling.

For employees earning higher basic salaries, the outcome will depend on the employer's existing EPF policy. Many companies voluntarily contribute PF on actual basic pay rather than the statutory ceiling. Such employers may continue with their existing practice unless they decide to revise salary structures or employees opt for lower statutory contributions where permissible.

Consequently, higher-paid employees should not assume that their monthly salary will automatically increase following the notification.

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Other key changes

Besides contribution rules, the EPF Scheme, 2026 simplifies advance withdrawals by reducing the number of withdrawal categories from 13 to three—essential needs, housing-related requirements and special circumstances. Members can withdraw up to 100% of the eligible balance, while retaining at least 25% of their total contributions in the provident fund account.

The scheme also strengthens employer compliance by requiring a consolidated Form V containing employees' Aadhaar, PAN, Universal Account Number (UAN), gross wages and EPF wages. Existing subscribers will continue under the new framework without interruption, while the government has also launched special compliance drives to resolve long-pending EPF cases and further modernise the country's provident fund system.

Up to 100% withdrawal, but 25% must remain

EPFO members will be permitted to withdraw up to 100% of their eligible balance, including both employee and employer contributions.

However, members must retain at least 25% of total contributions in their accounts. This minimum balance is intended to preserve a portion of the retirement corpus even when advance withdrawals are made.

New filing requirements for employers

Employers will face a wider set of compliance obligations under the scheme, including one-time, monthly and event-based filings.

Every employer must submit a consolidated return in Form V within 15 days of the scheme becoming applicable.

The return must include details of all employees, including:

• Aadhaar and PAN

• Universal Account Number

• Gross wages

• EPF wages

Alongside the EPF Scheme, 2026, the government has also notified three special drives to address historical compliance gaps and settle long-pending cases.