Employees Provident Fund: Budget 2026 proposes changes to employer contribution rules

Union Budget 2026 has proposed to rationalise the provisions relating to recognised provident funds by deleting parity-based and percentage-based limits on employer contributions.

The proposal aims to remove salary-linked relaxations and shareholder-based distinctions. Further, it aims to align eligibility for recognition with exemption under section 17 of the Employees’ Provident Funds and Miscellaneous Provisions Act, 1952, and modifying investment-related provisions to remove rigid statutory caps inconsistent with prevailing EPFO norms.

"It is proposed to amend Schedule XI to rationalise the provisions relating to recognised provident funds by deleting parity-based and percentage-based limits on employer contributions, removing salary-linked relaxations and shareholder-based distinctions, aligning eligibility for recognition with exemption under section 17 of the Employees’ Provident Funds and Miscellaneous Provisions Act, 1952, and modifying investment-related provisions to remove rigid statutory caps inconsistent with prevailing EPFO norms," Budget documents say.

The Union Budget has also proposed rationalising the due date to deposit employee contribution by the employer to claim such contribution as deduction

"It is proposed that deduction of any amount of contribution received by the assessee being an employer, from an employee, shall be allowed as deduction in the hands of the assessee if such amount is credited by the assessee to the account of the employee, in any provident fund or superannuation fund or any fund set up under the provisions of the Employees’ State Insurance Act, on or before the due date of filing of his return of income under section 263(1) of the Act," the Budget document says.