Employees’ Provident Fund Scheme, 2026: Ten Major Changes

The Employees’ Provident Fund (EPF) is India’s most significant social security and retirement savings system for employees in the organised sector. It is administered by the Employees’ Provident Fund Organisation (EPFO) under the Ministry of Labour and Employment. The Ministry of Labour and Employment notified the Employees’ Provident Fund Scheme, 2026 vide G.S.R. 525(E) dated 29 June 2026. The Scheme has been framed under Section 15(1)(a) of the Code on Social Security, 2020, and replaces the long-standing Employees’ Provident Fund Scheme, 1952. While preserving all actions validly taken under the earlier Scheme, the new framework comprehensively reorganises the legal provisions governing provident fund contributions, withdrawals, administration and compliance. It establishes the legal architecture for the administration of provident funds for employees in the private sector under the new Social Security Code.

Why the New Scheme (Code on Social Security, 2020) was Necessary?

Background

For more than seven decades, provident fund benefits for employees in the organised sector were governed by the Employees’ Provident Fund Scheme, 1952, framed under the Employees’ Provident Funds and Miscellaneous Provisions Act, 1952. Subsequently, the Government consolidated several labour legislations, including the EPF Act, into the Code on Social Security, 2020. Since the 1952 Scheme had been framed under legislation that now stands repealed, it became legally necessary to issue a fresh Scheme aligned with the language, structure and provisions of the new Code. The objective was not merely legislative replacement but comprehensive modernisation.

The new Scheme introduces a digital-first regulatory framework featuring complete digitisation of contributions, claims and record-keeping, simplified withdrawal procedures, faster settlement of pension and provident fund claims, updated provisions relating to the Employees’ Pension Scheme (EPS), clearer definitions applicable to gig workers, contract workers and international workers, and improved implementation of bilateral social security agreements. It also seeks to remove several procedural ambiguities that had accumulated over the decades under the earlier Scheme.

Who Will Be Affected?

The Employees’ Provident Fund Scheme, 2026 is expected to affect nearly eight crore active members employed in India’s organised sector. The EPF corpus presently exceeds ₹28 lakh crore, making it one of the world’s largest retirement savings funds. The Scheme applies to virtually all establishments covered under Chapter III of the Code on Social Security, 2020, which broadly corresponds to establishments previously covered by the Employees’ Provident Funds and Miscellaneous Provisions Act, 1952. It also extends to certain government and government-controlled establishments that are not covered by any other statutory pension scheme.

1. A New Statutory Foundation

Under the earlier framework, the EPF Scheme operated under Section 5 of the Employees’ Provident Funds and Miscellaneous Provisions Act, 1952. The new Scheme derives its authority from Section 15(1)(a) of the Code on Social Security, 2020, and must be read together with Sections 20, 21 and 143 of the Code.

Practical Impact

This is not merely a change in legislative citation. Every future legal interpretation relating to coverage, exemptions, contributions, recovery proceedings and penalties will now flow from the Social Security Code rather than the repealed EPF Act.

Employers, tax professionals, labour consultants and legal practitioners who have relied for decades on judicial precedents interpreting the 1952 Act will now need to reconcile those precedents with the revised statutory language, section numbering and legal framework introduced by the Code.

2. Complete Digitisation of Membership and Records

Traditionally, the EPF system depended heavily upon physical documentation. Employees submitted Form 11 for declarations, Form 2 for nominations, maintained paper-based records and passbooks, and filed withdrawal claims through physical Forms 19, 10C and 31, usually routed through the employer. Although online facilities were gradually introduced over the past decade, electronic processes largely remained optional.

The Employees’ Provident Fund Scheme, 2026 fundamentally changes this approach by making digital processes the primary mode of compliance rather than merely an alternative.

The major features include:

1. Mandatory Universal Account Number (UAN): Every employer must ensure that a Universal Account Number (UAN) is generated for employees who do not already possess one. Employers are also required to provide appropriate digital support to enable employees to access and download their electronic passbooks.

2. Digital Nomination: Members must register Aadhaar-linked bank account details together with details of eligible family members on the EPFO portal.

3. Mandatory E-Nomination: Nominations must be submitted through the designated electronic nomination portal and may thereafter be modified online whenever necessary.

4. Electronic Monthly Returns: Every employer must upload prescribed employee information—including new joiners, exits and monthly contributions—through the Electronic Challan-cum-Return (ECR) within fifteen days after the close of every month.

Illustration

Under the earlier Scheme, if John joined a new employer, his Universal Account Number was often generated several weeks later through the Human Resources department. If he married and wished to change his nominee, he had to complete and sign a physical Form 2, submit it to the employer, and wait for it to be forwarded to the EPF office.

Under the Employees’ Provident Fund Scheme, 2026, the process is almost entirely digital. Generation of the UAN, Aadhaar-based e-KYC, updating nominations and maintaining member records can all be completed directly through the EPFO Member Portal. The employer’s role is largely limited to facilitating the process and providing technical assistance where required.

This substantially reduces an employee’s dependence on the employer for routine administrative matters. At the same time, it places greater responsibility upon members themselves to ensure that their digital records remain accurate and up to date.

3. Contribution Rates and Voluntary Additional Contributions

For a clearer understanding of the applicability of the Employees’ Provident Fund (EPF) Scheme, 2026, employees may broadly be classified in my view  into four categories:

1. Employees whose earned wages do not exceed ₹15,000 per month.

2. Employees who initially earned wages up to ₹15,000 but subsequently crossed the statutory wage ceiling due to salary increments while continuing as EPF members.

3. Employees whose wages exceeded ₹15,000 from the very beginning but who voluntarily became EPF members through a joint option exercised by both the employer and the employee.

4. Employees whose wages exceeded ₹15,000 at the time of joining and who never opted to become members of the EPF Scheme. These are classified as “Excluded Employees.”

Under the revised Scheme, employees falling within the first three categories continue to be required to contribute 12% of their basic wages and dearness allowance (or 10% where the concessional rate is applicable), with an equal contribution from the employer. However, employees falling within the fourth category—namely, Excluded Employees—are outside the mandatory coverage of the Scheme. Consequently, neither the employee nor the employer is under any statutory obligation to contribute the minimum monthly EPF contribution of ₹1,800.

The most important clarification introduced by the new Scheme is that the statutory liability of both employer and employee continues to be restricted to 12% of the statutory wage ceiling of ₹15,000, i.e., ₹1,800 per month each, irrespective of the employee’s actual salary. Accordingly, even where an employee’s basic wages and dearness allowance substantially exceed ₹15,000 per month, the mandatory statutory contribution remains capped at ₹1,800 each from the employee and employer.

Although there has been sustained discussion in recent years regarding increasing the statutory wage ceiling from ₹15,000 to ₹21,000, the Government has retained the existing limit even under the Employees’ Provident Fund Scheme, 2026. This decision is likely to be welcomed by Micro, Small and Medium Enterprises (MSMEs), as any increase in the wage ceiling would have significantly increased their payroll costs.

Formal Recognition of Voluntary Higher Contributions (VPF)

One of the most significant reforms introduced by the new Scheme is the formal statutory recognition of Voluntary Provident Fund (VPF) contributions. Employees may now voluntarily contribute on wages exceeding the statutory ceiling of ₹15,000. However, the employer is not legally obligated to make a matching contribution on the excess amount. The Scheme further provides that an employee’s total voluntary contribution cannot exceed 100% of his or her basic wages and dearness allowance.

Illustration

Suppose an employee receives a basic salary plus dearness allowance of ₹40,000 per month and wishes to contribute provident fund on the entire salary. By submitting a joint written request with the employer under Paragraph 9(4), the employee may opt to contribute on the full salary of ₹40,000 instead of the statutory ceiling of ₹15,000. In such a case:

• The mandatory EPF contribution remains ₹1,800 (12% of ₹15,000).
• The balance contribution of ₹3,000 constitutes the employee’s voluntary contribution (VPF).
• The employer may, at its discretion, choose whether or not to contribute an equivalent amount on the additional ₹25,000 of wages. There is no statutory obligation to do so.

The Scheme also introduces an important administrative discipline. Once an employee opts for voluntary contributions, the option must ordinarily continue for the entire financial year. It cannot be withdrawn or modified repeatedly during the year. The employee is permitted to revise the voluntary contribution percentage only once during a financial year, with any further changes taking effect only from the beginning of the following financial year.

The voluntary contribution earns interest at the annual rate declared by the EPFO. At present, this rate stands at 8.25% per annum, and subject to compliance with the applicable provisions of the Income-tax Act, the interest may also qualify for tax benefits. Consequently, the Voluntary Provident Fund continues to remain one of the safest and most tax-efficient long-term savings instruments available to salaried employees.

Supreme Court Decision on PF Qualifying Wages

An important legal principle governing provident fund contributions continues to remain relevant.

In Surya Roshni Ltd vs Employees Provident Fund, R.P.(C) NOS. 1972-1973/2019 IN C.A. NOS. 3965-3966/2013 Dated: 28 August, 2019 the Supreme Court held that where an allowance is paid uniformly to all employees, merely describing it as a “Special Allowance” does not exclude it from provident fund wages. If employers artificially reduce basic salary and shift a substantial portion of salary to uniformly paid allowances with the objective of reducing provident fund liability, such allowances are liable to be included for EPF purposes.

However, genuine allowances such as House Rent Allowance (HRA), conveyance allowance, performance-linked bonus and other variable allowances continue to remain outside the ambit of provident fund wages where they satisfy the legal tests laid down by the Court.

4. Contract Labour and the Principal Employer

The Employees’ Provident Fund Scheme, 2026 expressly clarifies, for the first time, the statutory responsibility of the Principal Employer in relation to contract labour. Where workers are engaged through contractors who are not independently registered under the EPF law, the principal employer must initially deposit both the employer’s contribution and the employee’s contribution, together with the applicable administrative charges, within fifteen days after the close of each month.

Even where the contractor subsequently deposits the provident fund contributions, the ultimate legal responsibility continues to rest upon the principal employer. This clarification significantly strengthens compliance and minimises disputes regarding liability for contract workers.

5. Simplified Partial Withdrawals from the Provident Fund

One of the most transformative reforms under the Employees’ Provident Fund Scheme, 2026 relates to withdrawals during service. Under the 1952 Scheme, different withdrawal provisions were scattered across numerous paragraphs. Separate rules governed withdrawals for housing, illness, marriage, higher education, repayment of housing loans, renovation of residential property and several other purposes. Each provision prescribed different eligibility conditions, qualifying service requirements, documentary evidence and withdrawal limits. More importantly, the withdrawal limits were generally linked to multiples of the employee’s wages rather than the actual balance available in the provident fund account. Consequently, many employees possessing substantial provident fund savings were nevertheless unable to access a significant portion of their own accumulated funds during times of genuine financial need. The Employees’ Provident Fund Scheme, 2026 completely restructures this system. Paragraph 46 consolidates the earlier fragmented provisions into a single comprehensive framework for Partial Withdrawal. A member becomes eligible after completing twelve months of continuous membership. Thereafter, withdrawals may be made up to the member’s Eligible Member Balance, defined as: Total employee contribution + employer contribution + accrued interest − mandatory minimum balance of 25%. Thus, irrespective of the purpose of withdrawal, at least 25% of the accumulated provident fund balance must always remain in the account, thereby preserving a minimum retirement corpus. The minimum amount that may be withdrawn through a single application has been fixed at ₹1,000.

Illustration

Assume that Priya has accumulated ₹8,00,000 in her EPF account. Under the earlier Scheme, the amount she could withdraw for her daughter’s marriage depended largely upon salary-based formulae and often bore little relation to the actual balance standing to her credit. Under the Employees’ Provident Fund Scheme, 2026:

• Total EPF balance: ₹8,00,000
• Mandatory minimum balance (25%): ₹2,00,000
• Eligible Member Balance: ₹6,00,000

Accordingly, Priya may apply to withdraw the entire ₹6,00,000, subject to the prescribed limits on the number of withdrawals for that particular purpose. This marks a fundamental departure from the earlier wage-based system. Employees are now permitted to access up to 75% of their own accumulated savings, rather than an amount determined through rigid salary-based formulae.

6. Faster, Time-Bound Settlement of Claims

One of the most welcome administrative reforms introduced by the Employees’ Provident Fund Scheme, 2026 is the prescription of statutory timelines for claim processing. Under the Employees’ Provident Fund Scheme, 1952, although administrative instructions existed, the law did not prescribe a comprehensive chain of mandatory timelines for each stage of claim processing. In practice, provident fund claims frequently remained pending for several weeks or even months, particularly because most claims were routed through employers and processed manually.

The 2026 Scheme seeks to address this deficiency by introducing legally enforceable timelines. Claims received by the competent authority are required to be scrutinised and forwarded within five days, while the Commissioner must settle the claim and release payment within twenty days of its receipt. Where any deficiency is noticed, the applicant must be informed within the same prescribed period. Further, all claims relating to withdrawals, advances and transfers are now required to be filed electronically.

Practical Impact

For the first time, members—and in the event of death, their nominees or legal heirs—have a statutory benchmark against which administrative delays can be measured. This significantly strengthens accountability and provides a clear legal basis for seeking redress where claims are not disposed of within the prescribed time.

7. Rationalisation of Interest and Damages for Delayed Contributions

The 2026 Scheme also rationalises the structure of damages leviable on employers for delayed remittance of provident fund contributions. Under the earlier Scheme, damages were imposed under Paragraph 32A of the 1952 Scheme, while interest was separately recoverable under Section 7Q of the Employees’ Provident Funds and Miscellaneous Provisions Act, 1952. The rates varied according to the period of default and, in cases of prolonged delay, could become substantially onerous. Paragraph 23 of the new Scheme introduces a simpler slab-based structure:

The revised structure is intended to make the law simpler, more transparent and easier to administer while continuing to discourage delays in compliance.

8. “Vishwas, 2026” – A One-Time Compliance Window

The Scheme introduces “Vishwas, 2026,” a one-time amnesty-like settlement mechanism enabling employers to regularise specified historical defaults, generally relating to periods up to 14 June 2024, upon payment within the prescribed time. The objective is to encourage voluntary compliance by allowing old defaults to be settled with reduced penal consequences.

Practical Impact

For compliant employers, the Scheme provides a predictable and commercially reasonable opportunity to resolve legacy disputes. However, from an employee’s perspective, the reduction in penal liability may also mean that historical defaults do not always attract the full consequences that would otherwise have been imposed under the earlier framework.

Illustration

If an employer delayed depositing provident fund contributions by three months under the earlier Scheme, substantial damages could become payable depending upon the applicable slab. Under Paragraph 23 of the 2026 Scheme, the same delay would generally attract damages at 0.50% per month on the outstanding amount, making the liability significantly lighter and more transparent.

9. Modernisation of the Nomination Process

One of the persistent causes of delay in settlement of death claims under the earlier Scheme was the reliance upon paper-based nomination forms. Physical Form 2 was often misplaced, outdated or never updated after important life events such as marriage. Consequently, disputes among legal heirs and delays in settlement became common. The Employees’ Provident Fund Scheme, 2026 introduces a mandatory electronic nomination (e-Nomination) system. Existing nominations under the 1952 Scheme continue to remain valid. However, a fresh nomination becomes necessary after marriage, and where a member who previously had no family subsequently acquires one, the earlier nomination automatically becomes invalid in accordance with the Scheme.

Practical Impact

The migration to an electronic nomination system is expected to substantially reduce disputes arising from missing or obsolete nomination records, provided the digital infrastructure functions efficiently and members regularly update their nomination details.

10. International Workers

The 2026 Scheme retains and further clarifies the legal framework governing International Workers and Detached Workers under India’s bilateral Social Security Agreements. While the corresponding framework existed under the 1952 Scheme through subsequent notifications, the new Scheme incorporates these provisions directly into the principal text, thereby enhancing legal certainty. The Scheme specifically recognises the United Kingdom as a notified country having a reciprocal social security arrangement with India, while continuing to provide the statutory framework applicable to employees covered under bilateral agreements with other notified countries.

Limitations of the Employees’ Provident Fund Scheme, 2026

While the new Scheme represents a significant step towards modernising India’s provident fund framework, several important issues remain unaddressed.

1. Statutory Wage Ceiling Remains Unchanged

The wage ceiling of ₹15,000 per month continues to determine both mandatory coverage and compulsory contribution limits. Despite persistent demands from trade unions and labour organisations, the ceiling has not been revised to reflect inflation or current wage levels.

2. Mandatory Contribution Rates Continue Unchanged

The contribution rate remains 12% each for employers and employees (or 10% for notified establishments). Although policy discussions had suggested allowing employees greater flexibility to reduce their mandatory contribution in order to increase take-home salary, no such flexibility has been introduced.

3. Mandatory Retention of Twenty-Five Per Cent Balance

The requirement that at least 25% of the provident fund balance must always remain in the account promotes long-term retirement savings. However, this restriction may prove burdensome for low-income employees facing severe medical emergencies or family crises where access to the entire accumulated balance may be genuinely necessary.

4. Absence of Integration with EPS and EDLI

The Scheme deals exclusively with provident fund matters. It does not explain how the revised provisions relating to digital nominations, partial withdrawals or claim settlement will operate in conjunction with the Employees’ Pension Scheme (EPS) or the Employees’ Deposit Linked Insurance Scheme (EDLI). This leaves an important gap in understanding the overall retirement benefit framework.

5. Heavy Reliance on Digital Infrastructure

Although the Scheme permits manual processing in exceptional cases where members genuinely cannot access digital facilities, it does not prescribe a comprehensive Standard Operating Procedure or time-bound mechanism for such offline claims. This remains a matter of concern for elderly workers, employees in remote areas and persons with limited digital literacy.

6. No Expansion to Gig and Platform Workers

While the Code on Social Security, 2020 envisages extending social security benefits to gig and platform workers, the Employees’ Provident Fund Scheme, 2026 itself remains confined to establishment-based employment. Separate schemes or notifications will still be required before such workers can be brought within the provident fund framework.

7. Uncertainty Regarding Compensation to Employees under “Vishwas, 2026”

Although the amnesty scheme reduces employers’ penal liability, it does not specifically address how employees will be compensated for the loss of interest suffered due to delayed contributions. This issue remains inadequately addressed.

8. Traditional Definition of “Family”

The provisions relating to nomination continue to be founded upon a relatively traditional concept of family and do not expressly accommodate several evolving family structures that have gained legal recognition in other branches of law.

9. Limited Grievance Redressal Framework

While the Scheme prescribes timelines for claim settlement, it does not establish a structured grievance escalation mechanism for disputes relating to incorrect contribution reporting, UAN linkage errors, employer defaults or other routine operational issues frequently encountered by members.

Conclusion

The Employees’ Provident Fund Scheme, 2026 represents the most comprehensive restructuring of India’s provident fund law since the original Scheme of 1952. Rather than merely replacing the earlier framework, it modernises provident fund administration by embracing digital governance, simplifying withdrawal provisions, introducing statutory timelines for claim settlement and providing greater flexibility for voluntary retirement savings. The Scheme undoubtedly enhances transparency, administrative efficiency and member convenience. At the same time, it preserves the fundamental objective of the provident fund system—ensuring long-term financial security for employees after retirement.

Nevertheless, important policy issues remain unresolved. The continued retention of the ₹15,000 wage ceiling, the absence of integration with the Employees’ Pension Scheme and EDLI, limited accommodation for digitally disadvantaged workers, and the exclusion of gig and platform workers indicate that further reforms will be necessary to create a truly comprehensive social security framework. Accordingly, while the Employees’ Provident Fund Scheme, 2026 marks a significant milestone in India’s labour law reforms, it should be viewed as an important stage in an ongoing process of modernisation rather than the final destination. Continued legislative refinement and responsive implementation will determine whether the Scheme fully achieves its objective of delivering a transparent, efficient and inclusive social security system for India’s workforce.