-
September 11, 2026
EPF Rate Reduction from 12% to 10%: What Applies in 2026?
Introduction
The EPF rate reduction from 12% to 10% is still mentioned in many older payroll and compliance articles. This often creates confusion about whether the reduced rate is still applicable. In reality, the 10% contribution announced in 2020 was a temporary COVID-19 relief measure and did not permanently replace the standard Employees’ Provident Fund contribution rate. EPFO confirms that this temporary reduction applied only for the wage months of May, June and July 2020.
As of August 2026, the standard contribution for most establishments covered under EPF continues to be 12% from the employee and 12% from the employer. A 10% rate can still apply to specified categories of establishments, but this is different from the pandemic-era EPF rate reduction.
The Income-tax Act, 2025, effective from 1 April 2026, has also created questions about EPF taxation. However, it did not change the statutory contribution percentage. This article explains the historical EPF rate reduction, the current EPF rate, and the main provident fund tax changes under the new income-tax framework.
Quick Insights
- EPF rate reduction from 12% to 10% was a temporary COVID-19 relief measure in 2020.
- The standard EPF contribution rate in 2026 is 12% for most covered establishments.
- A 10% EPF rate still applies to certain specified categories of establishments.
- The Income-tax Act, 2025 did not change the statutory EPF contribution rate.
- EPF contribution rate and EPF interest rate are different, with 8.25% approved for FY 2025-26.
What Is EPF and How Does Contribution Work?
The Employees’ Provident Fund is a retirement savings scheme administered by the Employees’ Provident Fund Organisation. In the normal case, both the employee and employer contribute towards the employee’s provident fund account. EPFO’s current contribution guidance continues to show 12% as the standard statutory contribution rate, while 10% applies to specified categories.
Businesses becoming liable for coverage should complete EPF Registration and follow monthly filing requirements. Employers can also use our PF Returns Filing Services for ongoing compliance. The term EPF rate reduction therefore needs context. It should not be used to suggest that every establishment currently contributes only 10%.
When Was the EPF Rate Reduction Announced?
The Central Government introduced the EPF rate reduction as part of the Atmanirbhar Bharat relief package during the COVID-19 pandemic. The statutory contribution for eligible establishments was reduced from 12% to 10% for both employers and employees.
EPFO’s official FAQ confirms that the EPF rate reduction applied only for the wage months of May 2020, June 2020 and July 2020. The purpose was to provide additional liquidity to employers and increase immediate take-home pay for employees during a difficult economic period.
Therefore, the EPF rate reduction was temporary. It was never announced as a permanent replacement for the normal 12% contribution structure.
Why Was the EPF Rate Reduction Introduced?
The 2020 EPF rate reduction was introduced when businesses were facing cash-flow pressure and employees were dealing with uncertainty. A lower employee contribution meant a smaller PF deduction from salary and slightly higher take-home pay. Eligible employers also had a lower immediate contribution burden. EPFO described the measure as a way to increase liquidity for both employers and employees during the COVID-19 period.
However, employees contributed less to their retirement savings during those months. The temporary reduction should therefore be understood as short-term economic relief rather than a permanent change in provident fund policy.
Is the 2020 EPF Rate Reduction Still Applicable?
No. The special EPF rate reduction linked to COVID-19 ended after July 2020. Employers should not continue applying that temporary 10% rate simply because an old article refers to it.
For most covered establishments, the present standard contribution is 12% from the employee and 12% from the employer. EPFO’s current contribution guidance continues to prescribe 12% as the normal rate.
However, a 10% statutory rate still exists for specified categories. EPFO’s current guidance includes establishments employing fewer than 20 persons, specified sick establishments, establishments meeting certain accumulated-loss conditions, and specified industries such as jute, beedi, brick, coir and guar gum factories. This continuing 10% rate is separate from the COVID-era EPF rate reduction.
Employers should verify the category under which their establishment is covered before applying 10%. For wider coverage rules, read our guide on PF and ESIC Compliance.
What Is the Current EPF Rate in 2026?
As of August 2026, the standard EPF contribution rate for most covered establishments is 12% from the employee and 12% from the employer. EPFO states that contributions are payable on basic wages, dearness allowance and retaining allowance, subject to the applicable wage ceiling and scheme provisions.
This is the key point when discussing EPF rate reduction today. The pandemic relief has ended, the normal 12% rate applies to most covered establishments, and 10% is relevant only where the establishment falls under a specified eligible category.
For payroll support, businesses can use our Payroll Processing Services for salary calculations along with PF, ESI and TDS deductions.
EPF Rate Reduction vs EPF Interest Rate
A common mistake is to confuse EPF rate reduction with a change in the interest earned on EPF balances. These are separate concepts.
The contribution rate determines how much the employer and employee contribute each month. The interest rate determines the annual interest credited on eligible balances.
For FY 2025-26, the Central Government approved an EPF interest rate of 8.25% on EPF accumulations. The approval was communicated by the Ministry of Labour and Employment in June 2026.
Therefore, the standard 12% contribution rate and the 8.25% interest rate should not be treated as the same thing. Any current EPF discussion should clearly distinguish monthly contributions from annual interest.
Did the Income-tax Act, 2025 Change the EPF Rate?
No. The Income-tax Act, 2025 did not introduce an EPF rate reduction and did not change the normal contribution from 12%.
The Act came into force on 1 April 2026. The Income Tax Department explains that the new legislation mainly simplifies, consolidates and reorganises the income-tax framework. It also confirms that the new Act does not impose a new tax merely because it replaces the Income Tax Act, 1961.
EPF contribution percentages are governed through the provident fund framework administered by EPFO. Income-tax law deals with tax deductions, recognised provident funds and other tax consequences. A change in income-tax section numbering therefore does not itself result in an EPF rate reduction.
Readers can understand the broader transition through Income Tax Act 2025 Key Changes vs Old Income Tax Law.
What Changed for EPF Under the Income-tax Act, 2025?
1. EPF Deduction Has New Section References
Under the earlier law, qualifying employee provident fund contributions formed part of the section 80C deduction framework. Under the Income-tax Act, 2025, section 123 retains the Rs. 1.5 lakh aggregate deduction for specified savings instruments for individuals and HUFs. The Income Tax Department confirms that qualifying payments such as provident fund contributions are now placed in Schedule XV.
This is a restructuring of the tax provision, not an EPF rate reduction. The payroll contribution does not change simply because the income-tax deduction now appears under a different section and schedule.
2. Section 123 Deduction Is Restricted Under the New Concessional Regime
The Income Tax Department clarifies that the deduction under section 123 is not available to an assessee under the new concessional tax regime governed by section 202.
This affects the income-tax benefit, not the statutory contribution percentage. An employee may still have mandatory EPF contributions even when the related deduction is unavailable under the selected tax regime. For more information, see our guide on Section 202 of the Income Tax Act, 2025.
3. Recognised Provident Fund Compliance Has Been Reorganised
According to the Income Tax Department, Form 186 is used by employers or trustees to apply for recognition of a provident fund as a Recognized Provident Fund under the Income-tax Act, 2025. The form is prescribed under Rule 196 of the Income-tax Rules, 2026.
This is a compliance and recognition change, not a change in the statutory contribution rate.
4. Tax Year Terminology Applies From 1 April 2026
The Income-tax Act, 2025 uses the concept of a “tax year” under the new framework. The Income Tax Department confirms that the 1961 Act stands repealed from 1 April 2026, while tax years beginning before that date continue under the old law through the transitional provisions.
Employers and employees should therefore use the correct tax references for the relevant period. This structural transition has no effect on the contribution percentage and does not create an EPF rate reduction.
What Should Employers Do Now?
Employers should avoid treating the historical EPF rate reduction as a blanket current rule. Payroll teams should first identify whether the establishment falls under the normal 12% category or a specified category eligible for 10%.
They should also ensure that employee deductions, employer contributions and monthly PF filings are calculated and deposited correctly. Using an outdated percentage can create contribution shortfalls and compliance issues. Correct registration and filing are more important than relying on an old EPF rate reduction announcement.
What Should Employees Know?
Employees should review salary slips and understand which rate their establishment is applying. A 10% deduction should not automatically be assumed to be connected with the 2020 EPF rate reduction because the current EPFO framework separately provides a 10% rate for certain categories of establishments.
They should also distinguish monthly contribution from annual interest. For FY 2025-26, the approved EPF interest rate is 8.25%. Ebizfiling’s UAN Guide can also help employees understand UAN registration and activation.
How Can Ebizfiling Help with EPF Compliance?
Managing EPF registration, monthly contributions, payroll deductions, and return filing can become complex as a business grows. Ebizfiling helps employers handle these requirements with professional support, accurate documentation, and timely compliance.
From EPF registration and PF return filing to payroll processing and statutory deductions, Ebizfiling assists startups, SMEs, and established businesses in managing employee-related compliance more efficiently. Our team helps businesses understand applicable EPF rules, prepare the required records, and complete filings correctly. Avoid compliance errors and delays in your EPF process.
Get expert support from Ebizfiling for EPF registration, PF return filing, and payroll compliance. Contact us today to get started.
Conclusion
The reduction from 12% to 10% was temporary COVID-19 relief applicable for May, June and July 2020. It is not the general rate applicable today.
As of August 2026, most covered establishments continue with a 12% employee contribution and a 12% employer contribution. A 10% rate continues only for specified eligible categories under EPFO rules. The approved EPF interest rate for FY 2025-26 is 8.25%, which is separate from the contribution rate.
The Income-tax Act, 2025 has not introduced a fresh EPF rate reduction. Its relevant changes relate mainly to tax-law structure, section references, deduction provisions and recognised provident fund compliance. Employers should therefore apply the correct EPFO contribution rate and separately follow the income-tax rules applicable from 1 April 2026.
Frequently Asked Questions
1. Can an employee voluntarily contribute more than 12% to EPF?
Yes. An employee can contribute more than the statutory 12% through a higher voluntary contribution. However, the employer is not automatically required to match the employee’s higher contribution. EPFO states that an employee may contribute at a higher rate while the employer may restrict its contribution to the statutory requirement.
2. What happens to EPF and EPS contributions after an employee turns 58?
An employee can continue contributing to EPF even after attaining 58 years if they continue working. However, EPS contribution generally stops after the employee reaches 58 years, unless the applicable deferred pension conditions are met. In such cases, the employer’s share that would otherwise go towards EPS is credited to EPF according to the applicable rules.
3. Is EPS contribution required for a new employee joining with wages above Rs. 15,000?
If an employee was not already an EPF/EPS member and joins on or after 1 September 2014 with wages above Rs. 15,000, the employee does not ordinarily become an EPS member. Where EPF membership is taken under the applicable option, the employer’s entire applicable share goes towards EPF instead of diverting 8.33% to EPS.
4. Is EDLI contribution deducted from an employee's salary?
No. Employees do not make a separate contribution towards the Employees’ Deposit Linked Insurance Scheme. EPFO states that the employer pays the EDLI contribution, currently at 0.5% of applicable wages, subject to the prescribed wage ceiling.
5. Does the Rs. 15,000 EPF wage ceiling apply to international workers?
The normal Rs. 15,000 contribution wage ceiling does not generally apply to an International Worker covered under the EPF framework. Contributions for such workers are therefore subject to the special International Worker provisions and any applicable Social Security Agreement.
6. Can an employee stop EPF contributions after becoming an EPF member?
Generally, no. EPFO states that an employee who is required to be an EPF member does not have the option to discontinue membership while continuing in employment. Therefore, an increase in salary above the wage ceiling after becoming a member does not automatically end EPF membership.
7. Is EPF contribution payable when an employee receives no wages for a month?
EPF membership can continue during periods such as closure, lockout or strike. However, where no wages are payable for the relevant period, there may be no employee contribution to deduct because EPF contribution is linked to wages payable to the employee.
8. What happens if an employer deposits EPF contributions late?
A delay in depositing statutory EPF dues can result in additional financial liability. Under the current EPFO compliance framework, delayed payments can attract interest under Section 7Q and damages under Section 14B, subject to the applicable provisions and period of default. The revamped ECR system also provides for system-based calculation of applicable interest and damages.
9. How can Ebizfiling help when salary structure leads to incorrect PF calculations?
Ebizfiling can assist businesses with payroll setup and processing where PF calculations need to be aligned with salary components and applicable compliance requirements. Its payroll services include salary processing, PF and ESI support, salary registers, payslips and compliance-focused payroll calculations.
10. Can Ebizfiling help employers resolve validation errors under the revamped ECR system?
Yes. Ebizfiling provides support for PF return filing and has specific guidance on the revamped ECR system. Its published material states that assistance can include reviewing employee data, identifying mismatches, handling validation errors and supporting accurate monthly PF return filing under the updated ECR process.
PF registration
Get Provident Fund Registration with Ebizfiling at affordable prices
About Ebizfiling -
Reviews
Deepika Khan
29 Sep 2018I would rate 5/5 for their services, pricing and transparency.
Jay Shah
20 Apr 2018We had a great experience working with you. Kudos to Ebizfiling for your services.
Aditi Doshi
18 Mar 2018The team really puts effort to help you with the procedure. They are very efficient with their work. Kudos to the team!
September 29, 2026 By Srishti M
PF and ESI Compliance Calendar October 2026: Key Due Dates Introduction The PF and ESI Compliance Calendar October 2026 provides employers with important labour law compliance requirements related to EPF contribution payment and ESI contribution payment for September 2026. […]
September 21, 2026 By Siddhi R
July 20, 2026 By Steffy A
PF and ESI Compliance Calendar August 2026: Key Due Dates Introduction The PF and ESI Compliance Calendar August 2026 provides employers with the key statutory due dates for depositing PF and ESI contributions relating to July 2026. Adhering to these […]