The Labour and Employment Ministry has notified the Employees’ Provident Fund Scheme, 2026, formally capping the mandatory employee PF contribution at ₹1,800 a month and making anything above that voluntary. The scheme was notified this week and takes effect from June 29.
The statutory wage ceiling for EPF remains ₹15,000 a month, and the mandatory contribution rate stays at 12%, which works out to ₹1,800. Under the earlier framework, many employers calculated PF on an employee’s full basic salary rather than the ₹15,000 ceiling, effectively making higher contributions the norm even though the law never explicitly required it. The new scheme removes that ambiguity. Even an employee on a ₹1 lakh basic salary is only mandatorily covered up to ₹1,800; anything more is now a choice, not an obligation.
“The scheme expressly states that mandatory employee contribution remains 12% of the statutory wage ceiling, while any contribution above this amount is voluntary,” said Neha Jain, Chief Human Resources Officer at Choice International. She added that the clarification should reduce disputes over whether higher PF deductions are compulsory, something that’s long been a grey area for payroll teams.
The practical impact lands hardest on employees whose PF is currently computed on full basic pay. Take someone with a ₹60,000 basic salary. A 12% contribution on the full amount comes to ₹7,200 a month. Under the new scheme, only ₹1,800 of that is compulsory, and the rest becomes an opt-in decision, with take-home pay rising for anyone who chooses to reduce it.
The same notification also simplifies EPF advance withdrawal rules, cutting 13 separate categories down to three broad heads: essential needs (illness, education, marriage), housing, and special circumstances. Members can now withdraw up to 100% of their eligible balance, provided at least 25% of total contributions stays in the account.
