EPF Scheme 2026: Mandatory PF Capped at ₹1,800 — Employer Guide

The EPF Scheme 2026 came into effect on 29 June 2026, capping the mandatory provident fund contribution at ₹1,800 per month for both employer and employee — a fundamental change affecting roughly 8 crore EPFO members and every employer registered under the Act. For the first time, contributions above the statutory wage ceiling are formally classified as Voluntary Provident Fund (VPF), giving employees greater flexibility but creating new payroll, accounting, and compliance obligations for HR managers, CAs, and SMB owners.

If your payroll software still calculates PF on the full basic salary of high-earners, you may already have a compliance gap. Here is everything you need to know before the 15 August 2026 ECR deadline — the first major filing fully governed by the new scheme.

What Changed on 29 June 2026

The Old Framework

Under the Employees' Provident Funds and Miscellaneous Provisions Act, 1952 and the EPF Scheme 1952, both employer and employee contributed 12% of basic wages. Where an employee's basic salary exceeded ₹15,000 per month, many employers chose to contribute on the full basic as part of the CTC structure — and the entire contribution was treated uniformly as EPF with no formal distinction between mandatory and voluntary amounts.

The New Framework Under EPF Scheme 2026

From 29 June 2026, the structure is explicitly bifurcated:

• Mandatory contribution: 12% × ₹15,000 = ₹1,800/month each from employee and employer (the legal ceiling)
• Voluntary contribution (VPF): Any employee contribution above ₹1,800 is now formally classified as Voluntary Provident Fund
• Employer VPF matching: Optional — employers are not required to match employee VPF contributions
• Employee flexibility: Employees can increase, decrease, or stop their VPF contributions without employer approval

Anything above ₹1,800 must now be explicitly documented as a voluntary contribution. The old informal practice of simply contributing 12% on full basic salary no longer meets compliance requirements under the new scheme.

The Numbers Side by Side

For employees earning above ₹15,000 basic, this means a substantial increase in take-home pay. Communicate this change proactively — employees will notice it in their August 2026 salary slip, and it is better for them to hear it from you first.

Why This Matters for Employers

Mandatory Liability Is Reduced — But Documentation Is Now Critical

An employer contributing ₹6,000 per month on an employee earning ₹50,000 basic can now limit mandatory outgo to ₹1,800. However, if you continue contributing on the full basic (as many employers choose to for retention purposes), that additional ₹4,200 must be explicitly documented as a voluntary employer match. Undocumented contributions create ambiguity during EPFO inspections, statutory audits, and full and final settlements.

Payroll System Configuration Must Change

Your payroll setup must now enforce two distinct contribution types:

1. 1Mandatory EPF: 12% on wages capped at ₹15,000 (maximum ₹1,800 from each side)
2. 2VPF: Additional employee contribution — and optional employer match — above the cap

These two types feed into different columns in the ECR 2.0 upload file and are tracked in separate EPFO ledgers. Continuing with a single-column calculation based on actual basic salary will cause ECR 2.0 validation failures.

EPS Contribution Remains Unchanged

The employer's EPS (Employee Pension Scheme) contribution of 8.33% on ₹15,000 (₹1,250/month) remains unchanged. Only 3.67% of ₹15,000 (₹550/month) goes to the employee's EPF account as the employer's mandatory EPF share. This three-way split — employee EPF, employer EPF, employer EPS — must be correctly reflected in both your payroll configuration and ECR filing.

ECR 2.0 Upload: Filing July 2026 Wages by 15 August

The EPFO's revamped ECR 2.0 system (live since September 2025) supports the new mandatory/VPF structure natively. Here is the step-by-step process for filing July 2026 wages, due by 15 August 2026.

Step 1: Log In to the Unified Employer Portal

Visit the Unified Portal at unifiedportal-emp.epfindia.gov.in and sign in using your establishment credentials (establishment ID and password).

Step 2: Navigate to ECR Upload

Go to Payments → ECR Upload. Select the wage month as July 2026 and the contribution rate as 12%.

Step 3: Prepare Your ECR 2.0 File

The ECR file is a plain .txt file using #~# as the column separator. Under EPF Scheme 2026, the critical columns are:

• Column 5: Gross wages paid to the employee (net of NCP / LOP days)
• Column 6: Wages on which mandatory EPF is remitted — cap this at ₹15,000
• Column 7: VPF contribution amount from the employee (enter 0 if not opted in)
• Column 8: Wages on which EPS is computed — cap at ₹15,000

Example: An employee on ₹60,000 basic who has opted for ₹3,000 VPF — Column 6 shows ₹15,000, Column 7 shows ₹3,000.

Step 4: Upload, Validate, and Receive TRRN

Upload the file via the portal. A green "Validation Successful" bar confirms the file format is accepted. Click Verify to receive your TRRN (Temporary Return Reference Number) — retain this as your filing acknowledgement.

Step 5: Prepare Challan and Pay

Click Prepare Challan to generate the ECR summary. The challan now shows mandatory EPF, VPF, EPS, and EDLI amounts as separate line items. Pay via NEFT or net banking before 15 August 2026.

Consequences of late payment: Interest at 12% per annum applies from the due date. Damages under Section 14B of the EPF and Miscellaneous Provisions Act, 1952 range from 5% (delay up to 2 months) to 25% (delay beyond 6 months) of the amount due.

Accounting Entries Under the New Scheme

Maintain separate ledger accounts for mandatory EPF and VPF from the outset. Here are the journal entries for an employee on ₹60,000 basic with no VPF opted:

Salary processing entry:

Salaries & Wages A/c                     Dr.  ₹60,000
    To Employee EPF Payable A/c               Cr.   ₹1,800  (12% × ₹15,000)
    To Employee Net Salary Payable A/c        Cr.  ₹58,200

Employer PF and EPS expense entry:

Employer EPF Contribution A/c            Dr.     ₹550  (3.67% × ₹15,000)
Employer EPS Contribution A/c            Dr.   ₹1,250  (8.33% × ₹15,000)
    To EPF & EPS Payable A/c                  Cr.   ₹1,800

If the employer also matches VPF (₹3,000 voluntary match for a ₹60,000 basic employee):

Employer VPF Contribution A/c            Dr.   ₹3,000
    To VPF Payable A/c                        Cr.   ₹3,000

Keep mandatory EPF and VPF in separate payable accounts. Your statutory auditor will verify PF compliance as part of the audit report — clean separation in the ledger makes the verification straightforward and avoids qualification risks.

Action Checklist for CAs and Employers

Before 15 August 2026 (ECR deadline for July 2026 wages):

• [ ] Identify every employee with basic salary above ₹15,000
• [ ] Decide the employer VPF matching policy and document it in writing
• [ ] Collect VPF opt-in or opt-out declarations from all affected employees
• [ ] Reconfigure payroll software to cap mandatory deduction at ₹1,800 and route any excess to VPF
• [ ] Update the ECR 2.0 file template to populate mandatory EPF wages in Column 6 and VPF in Column 7
• [ ] Update payroll journal entry templates in your accounting software to use separate EPF and VPF accounts

Within 30 days:

• [ ] Revise offer letters and CTC breakups to reflect the mandatory / voluntary PF split
• [ ] Update PF nomination records for employees newly opening VPF contributions
• [ ] Communicate the take-home impact to all employees clearly and in writing
• [ ] Train the HR team on F&F settlement differences between mandatory EPF and VPF amounts

For CA firms managing multiple payroll clients:

• [ ] Prepare a standard VPF opt-in / opt-out declaration form and share with clients
• [ ] Circulate a client advisory note before 15 August 2026 explaining the EPF Scheme 2026 structure
• [ ] Audit each client's payroll software for ECR 2.0 VPF column support before the filing deadline

Common Mistakes to Avoid

1. Continuing 12% deduction on full basic without documentation

Deducting ₹6,000 from an employee earning ₹50,000 basic without a signed VPF opt-in form is non-compliant under EPF Scheme 2026. Every rupee above ₹1,800 needs an explicit, written opt-in from the employee.

2. Assuming employer VPF matching is mandatory

The employer's mandatory obligation ends at ₹1,800 per month. Choosing to match employee VPF is a company policy decision — not a statutory requirement under the new scheme.

3. Using the old single-column ECR format

Reporting wages on full basic in a single mandatory-wages column will fail ECR 2.0 validation or silently misclassify VPF as mandatory. Mandatory EPF wages (capped at ₹15,000) and VPF amounts must be in separate columns.

4. Mixing mandatory EPF and VPF in F&F settlement

During full and final settlement, mandatory EPF processes via Form 19 (composite claim form). VPF amounts settle through the same form but are tracked in a separate EPFO sub-ledger. Confusing the two leads to settlement delays and passbook mismatches that the employee will escalate.

5. Ignoring the June 2026 wage correction

The EPF Scheme 2026 took effect mid-month on 29 June 2026. If your June 2026 ECR (filed by 15 July 2026) was submitted on old rules, file a correction statement via the TRACES-equivalent EPFO portal to reflect the correct split for the last two days of June.

Key Takeaways

• The EPF Scheme 2026 took effect on 29 June 2026, capping mandatory PF at ₹1,800/month for both employee and employer — 12% on the ₹15,000 statutory wage ceiling
• Contributions above ₹1,800 are now Voluntary Provident Fund (VPF) — employees must formally opt in and employers choose whether to match
• 15 August 2026 is the ECR deadline for July 2026 wages — the first filing fully governed by the new scheme
• Employees earning more than ₹15,000 basic will see take-home increases of up to ₹5,400/month unless they opt for VPF
• Payroll software, ECR 2.0 files, and journal entries must separate mandatory EPF from VPF — these are distinct categories in EPFO ledgers
• Employer VPF matching must be documented in HR policy — it is not a legal obligation under the new scheme
• Late ECR filing attracts damages of up to 25% of dues under Section 14B of the EPF and MP Act, 1952

How corpus Helps

corpus automates the EPF Scheme 2026 bifurcation in every payroll run. Configure the ₹15,000 mandatory cap and each employee's VPF opt-in amount once — corpus applies the correct split across every salary cycle and flags employees who have not yet submitted a VPF declaration. The ECR 2.0 file export from corpus populates mandatory EPF wages in Column 6 and VPF amounts in Column 7 with an internal validation check before download, so you never face a portal rejection. Journal entries post automatically with mandatory EPF and VPF in separate payable ledger accounts, keeping your books audit-ready from day one. The built-in compliance calendar alerts you three days before the 15th-of-month ECR deadline for every client — so you never miss a deposit or pay avoidable interest under Section 14B.

Process your first EPF Scheme 2026-compliant payroll in corpus before 15 August — start a free trial at corpusca.in.