Introduction
The Employee’s Provident Fund Scheme, 2026 (‘2026 Scheme’) came into effect from July 2026, introduced as delegated legislation under the Code on Social Security, 2020 (‘SS Code’). Its arrival has raised a question that is more consequential in principle than in practice: whether the 2026 Scheme has actually displaced the Employee’s Provident Fund Scheme, 1952 (‘1952 Scheme’), given that the SS Code separately provides for a one-year transition period running until November 2026. Alongside this timing question, the 2026 Scheme also gives employees a clearer, codified right to manage their own contribution level, which carries its own set of practical implications for payroll and HR teams.
When Does the 2026 Scheme Actually Take Over?
Section 164(2)(b) of the SS Code preserves the 1952 Scheme, together with the Employee’s Deposit Linked Insurance Scheme, 1976, the Employee’s Pension Scheme, 1995, and the Tribunal (Procedure) Rules, 1997, for a period of one year from the SS Code’s commencement, to the extent these are not inconsistent with the Code. That transition period runs until November 2026. Minutes of the 239th Meeting of the Central Board of Trustees, EPF, held on 2 March 2026, appear to indicate an administrative intent to operationalise the 2026 Scheme ahead of that date.
As a matter of statutory interpretation, however, delegated legislation cannot override or curtail its parent statute. Since the 2026 Scheme is framed under the SS Code, it should be read as subordinate to, and consistent with, Section 164(2)(b). Where the parent statute expressly preserves the 1952 Scheme until November 2026, the more tenable legal position is that the 1952 Scheme continues to govern provident fund compliance until then, and that obligations introduced exclusively by the 2026 Scheme, such as the filing of Form V, would not become mandatory before the transition period expires.
In practical terms, this question is largely academic for most employers, since the scope of coverage, contribution rates and computation methodology remain substantially the same under both Schemes, and financial exposure is unlikely to differ depending on which Scheme is treated as currently operative.
Statutory Minimum Contribution and the Scope for Voluntary Contribution
Mandatory PF contribution continues to be pegged to the statutory wage ceiling of Rs. 15,000 per month, which, at 12%, works out to Rs. 1,800 per month. Any contribution beyond that ceiling, or at a rate higher than 12%, has always been voluntary rather than a statutory obligation, under both the 1952 and the 2026 Schemes.
Paragraph 19 of the 2026 Scheme now codifies this position more explicitly. It allows an employee to make an additional voluntary contribution on wages above the statutory ceiling, at the statutory rate or higher, with the employer remitting it through the Electronic Challan-cum-Return. The employer may choose to match this contribution but is not obliged to. Either the employee or the employer may, at any time, opt to reduce or discontinue such additional voluntary contributions. While the 1952 Scheme did not contain an equivalent express provision, courts have long treated an employer’s statutory obligation as co-extensive with the wage ceiling, with anything above it being voluntary and open to discontinuation. Paragraph 19 essentially puts this settled position on a clearer statutory footing.
What This Means in Practice for Employers
The 2026 Scheme requires that every employee be given the option to restrict their own PF contribution to the statutory minimum of Rs. 1,800 per month. This is an employee-driven election that employers cannot withhold. Once exercised, the employer retains discretion over its own contribution level, whether to reduce it to the statutory minimum as well, or to continue at a higher rate as a matter of policy, so long as the approach is documented and applied consistently.
Employers who have historically calculated PF contributions on Basic wages, within the statutory ceiling, may reasonably take the position that a joint declaration is not triggered, though the 2026 Scheme does not conclusively settle this, so the basis for that interpretation should be documented and records maintained in case subsequent clarification requires otherwise. The 2026 Scheme is also silent on how frequently employees must be allowed to change their election, leaving employers some flexibility to set defined intervals, provided the arrangement does not make the underlying statutory right difficult to exercise in substance.
Where an employee’s CTC has been structured around a higher employer PF contribution, reducing that contribution to the statutory minimum following an employee’s election would generally require reallocating the resulting differential to another component of remuneration, if the intention is to preserve the employee’s overall CTC. This follows from Section 124 of the SS Code, which prohibits a reduction in total employment benefits on account of PF liability, and may in turn require employers to revisit existing wage structures for consistency with the 50% wage rule. A related, secondary consideration is that reduced PF contributions increase an employee’s take-home pay but, for those under the Old Tax Regime, also reduce the deduction available for PF contributions, and therefore increase taxable income; no corresponding deduction exists under the New Tax Regime.
AMLEGALS Remarks
Employers should treat the employee’s right to opt for the statutory minimum PF contribution as a mandatory entitlement under the 2026 Scheme, while treating their own contribution level, the frequency of employee elections, and the treatment of any CTC differential as matters of policy discretion, to be addressed through a clearly documented and consistently applied framework rather than case-by-case decisions.
Given that the transition period under Section 164(2)(b) of the SS Code runs until November 2026, employers would be well advised to use the interim period to design and test their contribution-election process, update payroll and HR systems, document the basis for their approach on joint declarations, and prepare for any filings or disclosures the 2026 Scheme introduces, so that the transition, whenever it is treated as complete, causes minimal disruption to employees or to ongoing compliance.
For any queries or feedback, feel free to connect with Dhwani.tandon@amlegals.com