[Analysis] EPF Act under Code on Social Security 2020 – Coverage | Contribution | Schemes

EPF under the Code on Social Security 2020 is governed by Chapter III, sections 14 to 23, which replaced the Employees' Provident Funds and Miscellaneous Provisions Act, 1952. The Chapter applies to every establishment employing twenty or more employees. Section 16(1)(a) sets the contribution at ten per cent of wages, raised to twelve per cent by notification for most establishments. Out of the employer's share, 8⅓ per cent is diverted to the Pension Fund; the half per cent for deposit-linked insurance is paid on top.

Law stated as on 17 August 2026. The Code on Social Security, 2020 was brought into force in stages, the bulk of it with effect from 21 November 2025, and the three provident fund schemes were notified on 29 June 2026.

Table of Contents

1. What replaced the EPF Act, 1952
2. Which establishments Chapter III applies to
3. The three schemes, all notified on 29 June 2026
4. Why the Code says ten per cent and most employers pay twelve
5. What the twelve per cent is calculated on
6. Inside the employer’s share: the Pension Fund and the Insurance Fund
7. Contract labour and the section 17 recovery chain
8. Exempted establishments, and what exemption costs
9. The power to defer or reduce contributions
10. A dating question the notifications leave open
11. Frequently asked questions
12. Conclusion

1. What replaced the EPF Act, 1952

The Employees’ Provident Funds and Miscellaneous Provisions Act, 1952 now sits in Chapter III of the Code on Social Security, 2020, sections 14 to 23. Ten sections now carry the whole subject.

The correspondence is close enough to be traced provision by provision. Section 15 corresponds to sections 5, 6A, 6C and 7 of the 1952 Act; section 16 to sections 5, 6A and 6C; section 17 to sections 6 and 8A; and section 20 to section 16. What changed is not the architecture but the wage base, the rate mechanism and the timing, and each of those is where a payroll error now originates.

The Chapter came into force on 21 November 2025 by Notification S.O. 5319(E), and the Social Security (Central) Rules, 2026 followed on 8 May 2026 through G.S.R. 344(E). Our note on the Code on Social Security, 2020 covers the wider structure.

2. Which establishments Chapter III applies to

Section 1(4) sends the reader to the First Schedule. Against Chapter III, column (3) of that Schedule reads: every establishment in which twenty or more employees are employed. No proviso, no notified exception, no seasonal carve-out. Compare Chapter IV, where the ESI entry runs to three provisos.

Three further sub-sections matter more than the threshold itself:

• Section 1(5) allows voluntary coverage. Where it appears to the Central Provident Fund Commissioner that the employer and a majority of the employees have agreed that Chapter III should apply, he may apply it by notification from the date of the agreement or a later date specified in it. The proviso lets an establishment come out again on the same footing, a fresh agreement between employer and majority of employees.
• Section 1(6) allows the Central Government, after not less than two months’ notice of its intention, to apply the Code to any establishment employing not less than such number of persons as the notification specifies.
• Section 1(8) makes coverage a one-way door. An establishment to which a Chapter applies at the first instance continues to be covered even if the headcount later falls below the First Schedule threshold.[1]

Section 20 then removes four categories altogether. Chapter III does not apply:

• to a co-operative society employing less than fifty persons and working without the aid of power;
• to a Government establishment whose employees are already entitled to contributory provident fund or old age pension under a Government scheme or rule;
• to an establishment set up under any law whose employees are entitled to those benefits under that law; or
• to employees who were receiving provident fund benefits under a Central or State enactment immediately before the Code commenced.

Section 20(2) adds a separate power. The Central Government may, by notification and subject to specified conditions, exempt a class of establishments from the operation of the Chapter, prospectively or retrospectively, having regard to financial position or other circumstances.

3. The three schemes, all notified on 29 June 2026

Section 15(1) lets the Central Government frame the Provident Fund Scheme, the Pension Scheme and the Deposit Linked Insurance Scheme, and clause (d) adds a residual power to frame schemes for self-employed workers or any other class of persons. All three principal schemes were notified on the same day.

Scheme	Notification	Supersedes	Employee contributes?
Employees’ Provident Funds Scheme, 2026	G.S.R. 525(E), dated 29-6-2026	EPF Scheme, 1952	Yes
Employees’ Pension Scheme, 2026	G.S.R. 527(E), dated 29-6-2026	Employees’ Family Pension Scheme, 1971 and Employees’ Pension Scheme, 1995	No
Employees’ Deposit-Linked Insurance Scheme, 2026	G.S.R. 526(E), dated 29-6-2026	EDLI Scheme, 1976	No

Each supersession is expressed to be “except as respects things done or omitted to be done before such supersession”, so the older schemes survive for past acts. On the forward side, the transition is designed to be invisible to members. Existing members continue without fresh enrolment; balances, Universal Account Numbers, accumulated service, nominations and past contributions carry over; and existing pensioners continue to draw pension without interruption.

One point of drafting is worth noting. Section 15(2) permits the three schemes to provide for the matters in Parts A, B and C respectively of the Fifth Schedule, and that sub-section was not itself commenced early. It was section 15(3), the sub-section allowing a scheme to take effect prospectively or retrospectively, that was brought into force early. Notification S.O. 2060(E) dated 3 May 2023 commenced section 15(3), clause (a) of section 16(1) and section 16(2), in so far as each related to the Employees’ Pension Scheme, 1995. Clause (b) of section 16(1) was commenced outright on the same date. Chapter III did not switch on all at once.

4. Why the Code says ten per cent and most employers pay twelve

Section 16(1)(a) is the operative rate provision, and read on its own it sets a figure most employers will never pay. The contribution paid by the employer to the Provident Fund “shall be ten per cent of the wages for the time being payable to each of the employees (whether employed by him directly or by or through a contractor)”, and the employee’s contribution shall be equal to it. An employee who wishes to may contribute more than ten per cent, but the employer is under no obligation to match anything above his own statutory share.

The twelve comes from the first proviso. In its application to any establishment or class of establishments which the Central Government may specify by notification, after such inquiry as it deems fit, section 16 operates with “twelve per cent” substituted for “ten per cent” at both the places where they occur. Both places, so the substitution moves the employee’s share as well as the employer’s.

That notification is S.O. 3582(E), dated 1 July 2026, issued in supersession of S.O. 320(E) of 9 April 1997. It specifies twelve per cent for every establishment covered under sub-sections (4), (5) and (6) of section 1, which is to say the whole coverage triad described above, and it is expressed to come into force from 21 November 2025.

Paragraph 2 of the same notification takes six categories back out:

Establishment	Employer	Employee
Establishments covered under section 1(4), (5) or (6), generally	12% of wages	12% of wages
Establishment for which a resolution plan or repayment plan has been approved by the Adjudicating Authority under the Insolvency and Bankruptcy Code, 2016	10% of wages	10% of wages
Jute industry, beedi industry, brick industry, coir industry other than the spinning sector, and guar gum factories	10% of wages	10% of wages

The second proviso to section 16(1)(a) holds a further power in reserve. The Central Government may notify rates of employees’ contributions, and the period for which those rates apply, for any class of employee. Nothing has been notified under it so far, which means the employee’s share currently tracks the employer’s in every case.

5. What the twelve per cent is calculated on

Section 6 of the 1952 Act fixed the base as “basic wages, dearness allowance and retaining allowance”. The Code says “wages”, and sends the reader to section 2(88).

Section 2(88) includes basic pay, dearness allowance and retaining allowance, and then excludes eleven heads: statutory bonus not forming part of the terms of employment, house accommodation and utilities, employer contributions to any pension or provident fund with interest, conveyance allowance and travelling concession, sums to defray special expenses, house rent allowance, remuneration under an award or settlement, overtime allowance, commission, gratuity, and retrenchment compensation or other retirement benefits.

The first proviso is what makes the definition bite. If the payments under sub-clauses (a) to (i) of the exclusion list exceed one-half of all remuneration, or such other percentage as the Central Government may notify, the amount exceeding that one-half is deemed to be remuneration and is added back into wages. A salary structure built to keep basic pay low therefore cannot keep the provident fund base low beyond that point.

Above the base sits the ceiling. Section 2(89) defines “wage ceiling” as such amount of wages as the Central Government may notify for the purposes of becoming a member under Chapter III and Chapter IV, and the Code prints no figure. The figure came by notification: ₹15,000 per month for Chapter III, under S.O. 2702(E) dated 29 May 2026.[2]

Paragraph 18 of the Employees’ Provident Funds Scheme, 2026 works the ceiling through. Where a member’s monthly wage exceeds it, the employer’s and employee’s contributions are limited to the contribution payable on the ceiling. Paragraph 19 then allows an employee to contribute voluntarily on wages above the ceiling, at the statutory rate or higher, with the employer routing those voluntary contributions to the Commissioner through the Electronic Challan-cum-Return. An employer may contribute on wages beyond the ceiling to the Pension Fund only in cases already permitted for higher-wage contribution under the Employees’ Pension Scheme, 1995. Paragraph 2(f) closes the loop by defining an “excluded employee” as one whose wage, at the time he would otherwise become a member, exceeds the notified ceiling. Structuring exercises that turn on the one-half proviso and the ceiling together are what Taxmann’s Tools are built for.

6. Inside the employer’s share: the Pension Fund and the Insurance Fund

This is where most published summaries go wrong, and the error is structural rather than arithmetical.

Section 16(1)(b)(i) directs that the Pension Fund receives “such sums from the employer’s contribution under clause (a) not exceeding eight and one-third per cent of the wages”. The pension money is carved out of the twelve per cent the employer is already paying. It is not an additional levy. S.O. 3580(E), dated 1 July 2026, notifies 8⅓ per cent with effect from the commencement of the Employees’ Pension Scheme, 2026, that is 29 June 2026, and is expressed to be without prejudice to S.O. 2061(E) of 3 May 2023.

Section 16(1)(c) works the other way. The employer pays into the Deposit-Linked Insurance Fund “such amount, not being more than one per cent of the wages”, and that payment stands outside clause (a) altogether. S.O. 3581(E), dated 1 July 2026, notifies one-half per cent, again from 29 June 2026. The proviso to clause (c) adds a further sum, not exceeding one-fourth of that contribution, towards the cost of administering the Insurance Scheme.

Component	Rate	Source	Comes out of
Provident Fund, employer	12% of wages	Section 16(1)(a) with S.O. 3582(E)	The employer
Provident Fund, employee	12% of wages	Section 16(1)(a) with S.O. 3582(E)	Deducted from the employee’s wages
Pension Fund	8⅓% of wages	Section 16(1)(b)(i) with S.O. 3580(E)	Carved out of the employer’s 12%
Insurance Fund (EDLI)	0.5% of wages	Section 16(1)(c) with S.O. 3581(E)	The employer, in addition
EDLI administration	Up to one-fourth of the EDLI contribution	Proviso to section 16(1)(c)	The employer, in addition

Two features of the pension side do not appear in the Code at all. Paragraph 4 of the Employees’ Pension Scheme, 2026 records that the employee contributes nothing to the Pension Fund and that the Central Government contributes at 1.16 per cent, and that where a member’s wage exceeds ₹15,000 the employer’s and the Central Government’s contributions are limited to the amount payable on wages up to that ceiling. A second proviso to Paragraph 4(2) raises the employer’s pension contribution to 9.49 per cent, by adding 1.16 per cent to the 8⅓ per cent, for members who exercised the joint option under Paragraph 11 of the Employees’ Pension Scheme, 1995 and are found eligible, and applies it to wages exceeding ₹15,000 a month with effect from 1 September 2014. Paragraph 12 gives the pension formula, monthly member’s pension being pensionable wages multiplied by pensionable service and divided by seventy, with ten years of eligible service required for superannuation pension or early pension. Section 16(1)(b)(ii) separately routes contributions from establishments exempted under section 143, and clause (iii) admits sums appropriated by Parliament.

On the insurance side, Paragraph 5 of the EDLI Scheme, 2026 requires the contribution to be computed on wages as defined in section 2(88), subject to the wage ceiling in section 2(89). Paragraph 6 requires it to be paid, with administrative charges, within fifteen days of the close of every month, and Paragraph 8 forbids the employer from deducting it from the employee’s salary. Paragraph 21 carries the scale of assurance benefits. The Ministry of Labour and Employment has confirmed that the Code gives no establishment an option to substitute a private insurer for the Deposit-Linked Insurance Scheme.[3]

7. Contract labour and the section 17 recovery chain

Section 17 sets out who pays first and who may recover from whom, and its three sub-sections run in a deliberate order.

Section 17(1) defines the “amount of contribution” widely: the employer’s contribution, the employee’s contribution under any scheme, the employer’s contribution under the Insurance Scheme, and any charge for meeting the cost of administering the fund. Where that amount is paid or payable by an employer in respect of an employee employed by or through a contractor, the employer may recover it from the contractor, either by deducting it from any sum payable under the contract or as a debt payable by the contractor.

Section 17(2) lets the contractor pass down one element only, the employee’s contribution, by deduction from that employee’s wages.

Section 17(3) closes the route that would otherwise be tempting. Notwithstanding any contract to the contrary, no contractor shall be entitled to deduct the employer’s contribution or the administration charges from an employee’s wages, or otherwise recover them from that employee. A clause in the labour supply agreement saying the opposite is of no effect, and section 133(b) makes the deduction itself punishable with a fine which may extend to ₹50,000.

Paragraph 20 of the Employees’ Provident Funds Scheme, 2026 supplies the mechanics. The employer pays both contributions in the first instance, with administrative charges, within fifteen days of the close of every month. Where an employee is engaged by or through a contractor whose establishment is not independently registered, the contractor recovers the member’s contribution and pays it to the principal employer together with an equal amount, and the responsibility for paying both contributions rests with the principal employer throughout. Coverage of workers engaged through contractors is not a new controversy: the Supreme Court applied the 1952 Act to home workers engaged to roll beedis through contractors in S.K. Nasiruddin Beedi Merchant Ltd.[4]

8. Exempted establishments, and what exemption costs

Section 143(1) lets the appropriate Government grant exemption by notification from any or all of the provisions of the Code or a scheme framed under it. For the Provident Fund, Pension and Insurance Schemes, the proviso bars any grant or renewal without prior consultation with the Central Board, and the Board must forward its views within the prescribed time.

Two conditions govern the grant. Section 143(3) makes the exemption effective initially for three years from the date of publication of the notification, extendable thereafter. Section 143(4) permits it only where the employees concerned are otherwise in receipt of benefits substantially similar to, or superior to, what the Code or the scheme provides.

Exemption is not free. Under S.O. 2701(E) dated 29 May 2026, employers of exempted establishments pay inspection charges at 0.35 per cent of wages, subject to a minimum of ₹8,750, to the Provident Fund Administration Account, and 0.005 per cent, subject to a minimum of ₹1,250, to the Insurance Fund Administration Account, in each case within fifteen days of the close of every month. Section 133(p) then makes default in complying with an exemption condition, and section 133(q) makes failure to pay administrative or inspection charges, each punishable with a fine which may extend to ₹50,000.

9. The power to defer or reduce contributions

Section 144 has no ancestor. Against the corresponding-provisions entry for this section the answer is simply that none existed, and nothing in the 1952 Act or the Employees’ State Insurance Act, 1948 carried the power.

Notwithstanding anything in Chapter III or Chapter IV, the Central Government may by order defer or reduce the employer’s contribution, or the employee’s contribution, or both, in respect of establishments to which either Chapter applies, for the whole of India or any part of it, in the event of pandemic, endemic or national disaster. The relief runs for a period up to three months at a time. That last limit is the operative constraint. A longer disruption needs a fresh order every quarter, and each order is a discretionary act rather than an entitlement.

10. A dating question the notifications leave open

Put the three rate notifications side by side and a gap appears.

S.O. 3582(E) was issued on 1 July 2026 but is deemed to have come into force from 21 November 2025. S.O. 3580(E) and S.O. 3581(E), issued the same day, run only from 29 June 2026, being the date the Employees’ Pension Scheme, 2026 and the Deposit-Linked Insurance Scheme, 2026 commenced. For the seven months between 21 November 2025 and 28 June 2026, the twelve per cent therefore stands notified with retrospective effect while the pension and insurance rates under the 2026 schemes do not.

The practical question that follows is whether an employer who did not deduct at twelve per cent during those months may now recover the employees’ arrear share from current wages. There is authority pointing one way. District Exhibitors Association v. Union of India concerned the retrospective application of the Employees’ Provident Fund Scheme to cinema theatres with effect from 1 October 1984. The Supreme Court held that in view of Paragraphs 30 and 32 of that Scheme, the employer could not be saddled with liability to pay the employees’ contribution for the retrospective period.[5] Whether the same reasoning carries across to the 2026 Scheme has not been tested. Paragraph 22(1) is the successor of Paragraph 32, and its first proviso, that no deduction shall be made from any wages other than those paid in respect of the period for which the contribution is payable, bears directly on the arrear question. Pulling the other way, non-payment after the due date is a continuing offence rather than a single default, so exposure does not close with the month in which it arose.[6]

Anyone advising on the arrear period needs section 16 and the notification text open at the same time. Taxmann’s Law & Practice Relating to Code on Social Security prints section 16 against sections 5, 6A and 6C of the 1952 Act in a two-column table and reproduces all three July 2026 notifications in full in its appendices, which is where the mismatch in effective dates becomes visible on a single page.

11. Frequently asked questions

What is the PF limit, ₹15,000 or ₹21,000?

For provident fund purposes the figure is ₹15,000 per month. Section 2(89) of the Code defines “wage ceiling” as an amount to be notified, and S.O. 2702(E) dated 29 May 2026 notified ₹15,000 per month for the purposes of Chapter III. The ₹21,000 figure belongs to Employees’ State Insurance, and it comes from rule 50 of the Employees’ State Insurance (Central) Rules, 1950. Those Rules were superseded by the Social Security (Central) Rules, 2026 on 8 May 2026, and no wage ceiling for Chapter IV has yet been notified under section 2(89). S.O. 2351(E) dated 8 May 2026 anticipates one, providing that an employee whose wages cross the ceiling after a contribution period has begun remains an employee for the rest of that period.

Is employer contribution to PF 12 per cent or 13 per cent?

The notified provident fund contribution rate is twelve per cent, under the first proviso to section 16(1)(a) read with S.O. 3582(E). The employer’s total monthly outgo is higher, because the half per cent deposit-linked insurance contribution under section 16(1)(c) and S.O. 3581(E) is paid in addition to the twelve, as are administrative charges payable under Paragraph 20 of the Employees’ Provident Funds Scheme, 2026. The 8⅓ per cent that reaches the Pension Fund is not an addition; it is carved out of the twelve.

What are the new rules for EPF in 2026?

Three schemes were notified on 29 June 2026 and took effect the same day: the Employees’ Provident Funds Scheme, 2026 (G.S.R. 525(E)), the Employees’ Pension Scheme, 2026 (G.S.R. 527(E)) and the Employees’ Deposit-Linked Insurance Scheme, 2026 (G.S.R. 526(E)). They supersede the 1952, 1995 and 1976 schemes respectively, except as regards things done or omitted before supersession. Existing members continue without fresh enrolment, and balances, Universal Account Numbers, accumulated service and nominations carry over. The rates of 12 per cent, 8⅓ per cent and 0.5 per cent were notified on 1 July 2026.

What is Section 14 of the EPF Act?

Section 14 of the 1952 Act was the penalties provision. Its successor is section 133 of the Code on Social Security, 2020. Failure by an employer to pay any contribution is punishable with imprisonment which may extend to three years. The floor differs by default: a minimum of one year and a fine of ₹1,00,000 where the failure relates to the employee’s contribution already deducted from wages, and a minimum of two months, extendable to six, with a fine of ₹50,000 in any other case. A court may impose a lesser sentence for adequate and special reasons recorded in the judgment. Section 14 of the Code is a different provision altogether; it deals with the appointment of officers of the Central Board.

Who pays provident fund for contract workers?

The principal employer pays both contributions in the first instance under Paragraph 20 of the Employees’ Provident Funds Scheme, 2026, and may then recover the amount from the contractor under section 17(1), either from sums payable under the contract or as a debt. The contractor may recover only the employee’s share, and only from that employee’s wages, under section 17(2). Section 17(3) prohibits the contractor from deducting the employer’s contribution or the administration charges from wages, whatever the contract says.

12. Conclusion

Chapter III rewards care in two places. The first is section 2(88), because the Code moved the contribution base from basic wages and dearness allowance to “wages” with a one-half proviso that adds excluded components back in. The second is the difference between section 16(1)(b), which takes the pension money out of the employer’s twelve per cent, and section 16(1)(c), which adds the insurance money on top. Get the second wrong and the monthly outgo is understated by half a per cent of the wage bill in every month.

Everything else in the Chapter is dates. The Code commenced on 21 November 2025, the schemes on 29 June 2026, the rates on 1 July 2026 with one of them backdated to November, and the ceiling on 29 May 2026. Four dates, four notifications, and no single instrument that lines them up.

For section 16 set against sections 5, 6A and 6C of the 1952 Act, with the 2026 schemes and the rate notifications reproduced in the appendices, see Taxmann’s Law & Practice Relating to Code on Social Security. Our companion note on ESI under the Code on Social Security covers Chapter IV, where the wage ceiling and the contribution machinery work differently.

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[1] Section 1(8), Code on Social Security, 2020.

[2] Notification No. S.O. 2702(E), dated 29-5-2026, issued under section 2(89).

[3] Para 7.2 of the 9th Report of the Standing Committee on Labour.

[4] S.K. Nasiruddin Beedi Merchant Ltd. v. Central P.F. Commr. (2001) 2 SCC 612.

[5] District Exhibitors Association v. Union of India (1991) 3 SCC 119.

[6] Bhagirath Kanoria v. State of M.P. (1984) 4 SCC 222.