Provident Fund (PF) is one of the first compliance items an Indian IT company sets up, and one of the easiest to get wrong. Most guides online still say the PF wage ceiling is ₹15,000. That stopped being true on 17 September 2026, when the Labour Ministry raised it to ₹25,000 a month through notification S.O. 5109(E). It is the first change since 2014.
This guide explains how PF is calculated in 2026, what the new ceiling changes for employees and employers, and how to work out contributions with INR examples.
What Changed on 17 September 2026
The contribution rates did not change. The ceiling did.
| Until 16 Sept 2026 | From 17 Sept 2026 | |
|---|---|---|
| Statutory wage ceiling | ₹15,000/month | ₹25,000/month |
| Maximum employee PF (12%) | ₹1,800 | ₹3,000 |
| Maximum employer EPS (8.33%) | ₹1,250 | ₹2,083 |
| Maximum employer EPF (3.67%) | ₹550 | ₹917 |
| EDLI and admin charges (0.5% each) | ₹75 each at the ceiling | ₹125 each at the ceiling |
Two things follow for IT companies:
More employees are now covered. An employee with PF wages between ₹15,001 and ₹25,000 who was not a PF member before must now be enrolled, with EPF, EPS and EDLI starting 17 September 2026. This often affects junior developers, support staff and interns converted to full-time roles.
Employees whose contribution was capped at ₹15,000 now contribute more. Existing members with wages above ₹15,000 whose contribution was restricted to the old ceiling move to the new one. Their employee contribution rises by up to ₹1,200 a month.
September 2026 was a split month: 1–16 September on the ₹15,000 ceiling and 17–30 September on ₹25,000. October 2026 was the first full month on the new ceiling.
The PF Formula
On PF wages up to the ceiling:
- Employee: 12% of PF wages goes to the employee's EPF account.
- Employer: 12% of PF wages. Of this, 8.33% goes to the Employees' Pension Scheme (EPS) and 3.67% goes to the employee's EPF account.
- EDLI: the employer also pays 0.5% of PF wages for the Employees' Deposit Linked Insurance scheme.
- Administrative charges: the employer pays another 0.5% of PF wages.
EDLI and administrative charges are paid by the employer in addition to the 12%. They are not deducted from the employee.
Which Wages Count as "PF Wages"
Under the EPF Scheme, 2026 (notified on 29 June 2026 under the Code on Social Security, 2020), the contribution base is "wages" as defined in the Code, not "basic wages" as under the old 1952 Act.
In simple terms, wages are basic pay plus dearness allowance (and retaining allowance, where paid). Allowances such as HRA, conveyance, bonus and overtime are normally excluded.
There is an important limit on exclusions. If the excluded components add up to more than 50% of total remuneration, the excess is added back and treated as wages. This is called the 50% rule.
Example: An IT employee's total monthly remuneration is ₹40,000. The salary is structured as ₹16,000 basic plus ₹24,000 of allowances.
- Half of total remuneration is ₹20,000.
- The allowances (₹24,000) exceed that by ₹4,000.
- The ₹4,000 is added back, so PF wages are ₹20,000, not ₹16,000.
- Employee PF becomes ₹2,400 (12% of ₹20,000) instead of ₹1,920.
Companies that keep basic low to reduce PF should re-check their salary structures against this rule. Ask your CA how your own components are classified.
PF Calculation Examples in INR
Employer EPS is 8.33% of PF wages, and employer EPF is the balance of the employer's 12%.
| PF wages | Employee 12% | Employer EPS 8.33% | Employer EPF 3.67% | EDLI 0.5% | Admin 0.5% |
|---|---|---|---|---|---|
| ₹12,500 | ₹1,500 | ₹1,041 | ₹459 | ₹63 | ₹63 |
| ₹15,000 | ₹1,800 | ₹1,250 | ₹550 | ₹75 | ₹75 |
| ₹20,000 | ₹2,400 | ₹1,666 | ₹734 | ₹100 | ₹100 |
| ₹25,000 or more (at the ceiling) | ₹3,000 | ₹2,083 | ₹917 | ₹125 | ₹125 |
Example A: An Existing Member, Capped at the Old Ceiling
A senior developer earns ₹60,000 a month and the company was contributing on ₹15,000.
- Before: employee ₹1,800. Employer ₹1,800 plus ₹150 for EDLI and admin, so ₹1,950.
- Now: employee ₹3,000. Employer ₹3,000 plus ₹250, so ₹3,250.
- Monthly effect: the employee's take-home falls by ₹1,200 and the employer's cost rises by ₹1,300, unless the salary structure is changed.
Example B: A Newly Covered Junior Developer
PF wages are ₹18,000 a month. Before 17 September this employee was outside mandatory PF.
- Employee: ₹2,160.
- Employer: EPS ₹1,499 plus EPF ₹661 (total ₹2,160), plus EDLI ₹90 and admin ₹90. Employer outgo is ₹2,340.
Example C: A Company Already Contributing on Full Basic
If a company was already contributing 12% on actual basic and DA above the old ceiling, total PF outgo does not change. The employer's share is re-split, with more going to EPS and less to EPF, because the EPS limit is now ₹2,083.
What IT Employers Should Do Now
- List employees with PF wages between ₹15,001 and ₹25,000 who are not PF members. Enrol them, generate or link their UAN, and complete KYC and e-nomination.
- Revise the cap for existing members whose contributions were limited to ₹15,000. Set it to ₹25,000, or actual wages if lower.
- Check wage components against the 50% rule in every salary structure.
- Update offer letter and CTC templates that assume PF on a ₹15,000 ceiling.
- Tell employees before the first payslip that their take-home will change, with a one-line example.
Pro-rata rules apply to mid-month joiners and loss-of-pay days. PF wages reflect wages actually earned for the month, which is why attendance data should reach payroll accurately.
Due Dates
Employers deposit PF contributions and file the ECR (Electronic Challan cum Return) every month. Under current EPFO practice, the due date is the 15th of the following month. Check the EPFO portal for any change under the new Scheme.
Where TrackPM Fits
TrackPM's payroll module calculates PF from your company's PF settings. You choose the PF basis and set the wage limit, so moving from the old ceiling means changing ₹15,000 to ₹25,000 in one place. PF can also be pro-rated for loss-of-pay days, which come from the attendance and leave records your team already keeps in office management. How your salary components are classified under the 50% rule is still a decision to make with your CA.
Frequently Asked Questions
What is the PF wage ceiling in 2026?
The ceiling is ₹25,000 a month from 17 September 2026, up from ₹15,000. It was notified by the Labour Ministry under the Code on Social Security, 2020 through S.O. 5109(E). Contribution rates are unchanged at 12% each for employee and employer.
How much PF is deducted from salary?
12% of PF wages. At the ceiling, that is a maximum of ₹3,000 a month for the employee. Employees whose wages are below the ceiling pay 12% of their actual PF wages.
Is PF compulsory for employees earning above ₹25,000?
Employees with wages above ₹25,000 who are not already PF members are excluded employees, and PF is optional for them. Existing members continue as members. Contribution above the ceiling is voluntary.
How is the employer's 12% split?
8.33% goes to the Employees' Pension Scheme (EPS) and 3.67% goes to the employee's EPF account. At the ₹25,000 ceiling, that is ₹2,083 to EPS and ₹917 to EPF. The employer also pays 0.5% EDLI and 0.5% administrative charges on top.
Did the PF rate change in 2026?
No. The 12% employee and 12% employer rates are unchanged. Only the wage ceiling changed, and the contribution base now follows the Code's definition of "wages", including the 50% rule.
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