Alert

Executive summary

The Ministry of Labour and Employment has notified the Employees’ Provident Funds Scheme, 2026 (“New Scheme”), replacing the Employees’ Provident Funds Scheme, 1952 (the EPF Scheme, 1952) and operationalising provident fund provisions under the Code on Social Security, 2020. The Scheme came into force on 1 July 2026 and forms part of the broader transition to the Labour Codes framework.

In addition, the Government has introduced three special transition schemes – Employees’ Enrolment Campaign, 2026, VISHWAS, 2026 and AMNESTY, 2026 – aimed at facilitating compliance regularisation and dispute resolution. In our alert, we have summarised the key provisions:

Key highlights

• Continuity of coverage and membership

The New Scheme ensures continuity for existing members by providing that the employees who were members under the EPF Scheme, 1952, shall continue as members under the New Scheme. The concept of “excluded employee,” linked to the statutory wage ceiling (INR 15,000 per month, as per the notification dated 29 May 2026), has also been retained. It is not mandatory for the ‘excluded employees’ to be covered under the New Scheme; however, the option of voluntary coverage is retained.   

Impact on employers: Existing Employee Provident Fund (EPF) membership structures can largely continue. Employers should nevertheless review the inclusion process for new employees to be covered under the New Scheme.

• Contribution framework remains largely unchanged

The New Scheme continues with the existing contribution structure requiring both employer and employee to contribute 12% of ‘wages’ as defined under the Code on Social Security, 2020, subject to the prescribed wage ceiling. If the wage of a member exceeds the prescribed wage ceiling, the mandatory contribution is to be calculated on the wage ceiling. However, the member has an option to contribute a higher amount voluntarily. The employer, if so desires, can make a matching contribution.

Impact on employers

1. Payroll systems may require modifications to accommodate flexible contribution arrangements.
2. Additional administrative charges may apply where voluntary contributions are made.

• Simplified withdrawal and partial withdrawal framework

Impact on employers: HR and payroll teams should understand the revised withdrawal eligibility conditions to support employee queries.

• Increased accountability for principal employers

The New Scheme introduces a specific definition of ‘principal employer’ and clarifies that principal employers remain responsible for provident fund compliance in relation to employees hired through third-party contractors, particularly where contractors are not independently registered under the Scheme. Even where contractors undertake compliance activities, ultimate liability continues to rest with the principal employer. The Scheme also introduces new contractor-related compliance obligations.

Impact on employers: Organisations engaging contract labour should assess contractor registration status and strengthen contractor due diligence mechanisms.

• International worker

The New Scheme retains the framework relating to international workers and clarifies the continuation of membership for individuals already covered under the earlier Scheme. It also provides detailed provisions relating to social security agreements and detached worker arrangements.

Impact on employers: Multinational organisations should review contribution obligations for foreign nationals working in India or Indian employees sent to work outside India and related compliances

• Significant changes for exempted provident fund trusts

1. Exemption validity is initially limited to three years, with mandatory renewal requirements;
2. Board governance obligations and annual audit requirements;
3. Electronic maintenance of trust records;
4. Enhanced reporting requirements and stricter investment governance provisions.
5. Existing exempted establishments are required to apply for continuation of exemption within prescribed timelines.

Impact on employers: This is likely to be one of the most significant areas requiring immediate review for large organisations maintaining private PF trusts.

• Expanded digital compliance framework

The New Scheme introduces extensive reporting obligations through electronic platforms, including consolidated employee returns, ownership disclosures, authorised signatory filings, contractor declarations, employee joining and exit reporting and electronic contribution reporting through Electronic Challan cum Return (ECR) mechanisms.

The Scheme also mandates greater use of Aadhaar, permanent account number (PAN), Universal Account Number (UAN) and Aadhaar-seeded bank accounts for employee identification and administration. The increased emphasis on electronic reporting indicates a move towards more data-driven enforcement by the Employees' Provident Fund Organisation (EPFO).

Impact on employers: Employers may need to revamp the EPF compliance framework.

• Rationalised damages and compliance enforcement

The Scheme incorporates revised provisions relating to damages for delayed compliance and codifies a structured framework for recovery actions. This may be particularly relevant for employers with pending compliance disputes.

• Three special transition schemes
  1. Alongside the EPF Scheme, 2026, the Government has notified three special initiatives intended to support compliance regularisation and dispute resolution.  
  2. Employees’ Enrolment Campaign, 2026: Designed to facilitate enrolment of previously uncovered employees and establishments into the provident fund framework. The initiative builds upon earlier enrolment drives aimed at expanding social security coverage.
  3. VISHWAS, 2026: Introduced as a dispute-resolution mechanism providing reduced damages in specified ongoing litigation and compliance matters.
  4. AMNESTY, 2026: Provides a structured opportunity for organisations to regularise historical compliance issues, particularly in relation to recognised PF trusts and exemption-related matters. The scheme is intended to facilitate faster resolution of legacy disputes and protect employee interests.

BDO India Comments

The EPF Scheme, 2026, does not fundamentally alter the contribution architecture of India’s provident fund system. However, it introduces a considerably more robust governance, compliance and digital administration framework. The notification signals the Government’s intention to move towards greater transparency, technology-enabled administration and enhanced accountability across the provident fund ecosystem.

Employers should view the transition as an opportunity to undertake a comprehensive PF health check, review contractor governance frameworks, assess exempted trust arrangements and evaluate the benefits available under the newly introduced compliance regularisation schemes. Early preparedness will be critical in managing compliance risk and ensuring a smooth transition to the social security regime under the Code on Social Security, 2020.