The government announced the Employees' Provident Funds Scheme, 2026 on 29 June 2026, replacing the earlier EPF Scheme 1952. According to Mint, the new scheme introduces significant changes to EPF contributions, withdrawals, and tax implications. Employee and employer contributions remain at 12% of wages, with the current wage ceiling set at ₹15,000 per month, resulting in a maximum employee contribution of ₹1,800 per month. The scheme allows voluntary contributions beyond the wage ceiling, with employers under no obligation to match additional voluntary contributions.
Salaried employees contributing to Employees' Provident Fund (EPF) receive matching employer contributions and assume their interest earnings are always tax-free. However, a new tax rule introduced since 2022 creates restrictions for high contributors. According to reports from Mint, if total annual PF contribution, including employee and employer's 12% contribution and Voluntary Provident Fund (VPF), exceeds ₹2.5 lakh in a financial year, the interest earned on the excess amount becomes taxable.
The new scheme allows employees with wages exceeding ₹15,000 to make voluntary contributions at 12% or higher rates. As reported by Mint, employees can voluntarily contribute additional amounts on wages above the wage ceiling, with employers having no obligation to match these voluntary contributions. Employees may opt to reduce or stop these additional voluntary contributions at any time, resulting in higher take-home salary but a smaller retirement corpus. The compulsory EPF contribution remains capped at ₹1,800 per month for both employee and employer, linked to the statutory wage ceiling of ₹15,000.
The new EPF Scheme 2026 simplifies the withdrawal system from 13 categories to just 3 categories for partial withdrawals. According to Mint, partial withdrawals are now allowed with a minimum balance of 25% of total contributions maintained. The scheme allows partial withdrawals for health, education, marriage, housing, and special circumstances, with specific limits on frequency and amounts. Full withdrawal remains permitted for retirement at age 55, permanent incapacity, migration, retrenchment, or VRS schemes. The most significant change is that EPF withdrawal wait period has increased from 2 to 12 months for employees leaving employment.
The Voluntary Provident Fund is an optional extension allowing employees to contribute beyond mandatory limits, with extra amounts remaining in the EPF account without employer matching. As reported by Mint, historically VPF investments enjoyed Exempt-Exempt-Exempt (EEE) tax status, but since 2022, the central government has introduced restrictions for very high contributors. The excess amount above ₹2.5 lakh will be added to taxable income and taxed at applicable slab rates. Under the new scheme, VPF contributions up to ₹1.5 lakh are allowed as deductions under Section 80C, with any lumpsum amount earned from VPF remaining exempt from tax provided withdrawal occurs after five years.
