EPF Scheme 2026: The government has officially introduced the Employees’ Provident Fund (EPF) Scheme 2026 under the Social Security Code, 2020, replacing the existing PF deduction system, starting from June 29, 2026. This change has raised concerns among employees about whether their monthly take-home pay will increase or decrease.
Previously, both employees and employers were required to contribute 12% of the employee’s basic salary and dearness allowance (DA) to the PF account. This meant that higher salaries led to higher PF contributions. However, under the new EPF Scheme 2026, the mandatory monthly EPF contribution is now capped at Rs 1,800 each, allowing employees and companies to make additional voluntary contributions if desired.
The impact on take-home salaries will vary based on individual circumstances. According to chartered accountant Suraj Singh of SD Singh & Associates, if an employee’s previous monthly PF deduction exceeded Rs 1,800 and is now lowered to Rs 1,800, their salary deduction will decrease. Unless extra voluntary contributions are made, the employee’s take-home pay could increase, although this will depend on their overall cost-to-company (CTC) structure.
For example, if an employee’s basic salary is Rs 50,000 per month, previously both the employee and the employer contributed Rs 6,000 each (12% each), totaling Rs 12,000 per month. With the new rule, the mandatory contribution is reduced to Rs 1,800 each, resulting in a total of Rs 3,600 deposited monthly. The difference of Rs 4,200 (Rs 6,000 – Rs 1,800) that was previously deducted from the employee’s PF contribution could now be saved, potentially boosting their take-home salary.
The employees most affected by this change will be those with higher salaries, as a significant portion of their PF contribution will now become voluntary. Conversely, employees with lower salaries, whose PF contribution was around Rs 1,800, will not notice a significant impact from this adjustment.
While having more disposable income each month may seem beneficial, some experts warn of potential long-term drawbacks. Pranav Sai S highlights that receiving the EPF amount as additional salary might impact future retirement savings, leading to lower EPF contributions and diminished compounding benefits, resulting in a significantly reduced retirement fund.