The government can defer or reduce employer, employee or both provident fund contributions for a period of up to three months under the new Employees' Provident Fund Scheme, 2026. The provision is applicable only in case of a pandemic or national disaster.
EPF contributions will only be affected if the government issues an order invoking the provision. Otherwise, they will continue as normal.
The existing EPFO rules require employers and employees to contribute 12% each, subject to applicable rules.
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What Happens If PF Contributions Are Reduced?
If the employee's EPF contribution is reduced under the new rules, it would result in lower deductions from their salary. This would provide some cash-flow relief to households dealing with economic difficulties.
However, the increase in take-home pay would mean a reduction in the retirement corpus.
For example, if the employee contribution were lowered to Rs 5,000 from Rs 6,000 for three months, there would be a shortfall of Rs 3,000 in their contributions.
The impact on an employee's total retirement corpus would depend on two factors: the time remaining until retirement and the size and duration of the reduction. A contribution missed early in a person's career has a longer period over which it could otherwise have earned interest.
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In case of a deferment, the government would postpone the payments and may resume them from a specified date. The impact would depend on the exact conditions mentioned in the government's order.
If the government reduces the employer's provident fund contribution, the retirement corpus would be impacted in the same way.
Lower deductions mean a fall in the amount that would otherwise have been compounded.
New Rules About Voluntary Contributions
Under the new EPF rules, an employee can choose to contribute an additional amount on wages that exceed the statutory wage ceiling. The employer does not need to automatically match the additional contribution.
Rules governing the treatment of voluntary contributions during pandemics or any other emergency will depend on the EPF order issued by the government.
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