What actually happened on 29 June

The Employees’ Provident Funds Scheme, 2026 was notified by the Ministry of Labour and Employment through G.S.R. 525(E), dated 29 June 2026, and comes into force on publication in the Official Gazette. It is made under the Code on Social Security, 2020 rather than the Employees’ Provident Funds and Miscellaneous Provisions Act, 1952, and it supersedes the 1952 scheme except in respect of actions already taken under it. Companion schemes for pension and deposit-linked insurance were notified on the same day.

That is a change of legal foundation as much as of content. The 1952 scheme had been amended many times across seven decades; the 2026 scheme restates it inside the labour-code framework. Most of what employers do is administrative. For members, almost all of the practical change is on the withdrawal side.

Some things did not change, though a lot of coverage in July implied otherwise. Contributions remain 12% of wages from the employee and 12% from the employer, with the reduced 10% rate continuing for notified categories of establishment. The statutory wage ceiling is unchanged. The interest rate is untouched by the notification: the Central Board of Trustees recommended 8.25% for FY 2025-26 at its 239th meeting, the same rate as the two preceding years, and rate-setting continues to work exactly as before.

The minimum balance, and what it is 25% of

The new provision is a floor on the account. After any partial withdrawal taken while you are still employed, a minimum balance has to remain.

The stated rationale is compounding. Money that stays in the account keeps earning the EPF rate, which at 8.25% is materially above what most retail savings instruments pay, and the floor is intended to stop an account being repeatedly emptied and restarted across a career.

Thirteen grounds became three categories

The 1952 scheme accumulated thirteen separate grounds for partial withdrawal, each with its own eligibility period, documentation and limit. The 2026 scheme collapses them into three.

A minimum of twelve months of total membership is required across the categories, and the smallest permitted withdrawal is ₹1,000. Within a category the limit is the eligible member balance, so the constraint that binds in practice is the 25% floor rather than a separate per-ground cap.

On balance this is a simplification that favours members. The old regime made you argue that your reason fitted a specific numbered ground; the new one asks which of three broad buckets you are in. Illness in particular carries no stated frequency cap, which is the right way round.

What the floor looks like on a real balance

Take a member with ₹8,00,000 standing to their credit, counting employee share, employer share and accrued interest, who has completed more than twelve months of membership and wants to draw for a housing need.

The minimum balance is 25% of ₹8,00,000, which is ₹2,00,000. The eligible member balance is the remaining ₹6,00,000, and that is the ceiling on the withdrawal. Under the 1952 scheme the same member, on the right ground and with the right service, could in several cases have reached a good deal closer to the full balance.

The floor is not a fixed rupee amount. It is a percentage of a balance that keeps growing, so it ratchets. When the same account reaches ₹16,00,000 the locked portion is ₹4,00,000, not the original ₹2,00,000.

Whether that is a cost or a benefit depends entirely on the time horizon you apply to it. Left alone at a constant 8.25%, the ₹2,00,000 locked in the example above compounds to roughly ₹9,76,000 over twenty years. That calculation assumes the rate never changes, which it certainly will, and that nothing is added to the locked portion, which is false because the floor ratchets — both assumptions push the real figure around. It is an illustration of the mechanism, not a projection of your account.

When the locked quarter is actually released

The floor applies to partial withdrawals during employment. It is not permanent. Full settlement of the entire balance, the locked portion included, is permitted on:

1. Retirement at or after the age of 55.
2. Permanent and total incapacity for work, medically certified.
3. Permanent migration abroad.
4. Retrenchment, whether individual or as part of a larger exercise.
5. Voluntary retirement by mutual agreement.

And then there is unemployment, which is the provision most likely to catch someone out.

For someone who finds work in month three, this is close to costless: the remaining quarter stays invested at 8.25% and the service record is unbroken, which is probably better than having taken it. For someone who does not, the last quarter of their provident fund is unavailable during precisely the year they are most likely to need it.

The part that got dramatically faster

In 2026 the state also made getting at the reachable part of provident fund money far quicker.

EPFO’s auto-settlement facility processes advance claims with no human involvement: the system checks eligibility and credits the money, typically within 72 hours. The ceiling on that facility was raised from ₹1 lakh to ₹5 lakh, and it covers advances for illness, education, marriage and housing — which is to say most of the reasons anyone actually claims.

The scale is already substantial. In FY 2024-25 EPFO auto-settled 2.34 crore advance claims, against 89.52 lakh the year before, a rise of about 161%. The share of all advance claims going through the automatic route moved from 31% to 59% in a single year.

Eligibility depends on housekeeping rather than discretion: an Aadhaar-linked UAN, correct bank details and completed KYC. Members whose records are stale fall out of the fast path and back into manual processing, which is the ordinary reason two people with identical claims wait very different lengths of time.

A quarter of the account is fenced off for retirement; the remaining three-quarters is meant to arrive in three days instead of three weeks. Whether that trade suits you depends on whether your problem was ever access speed or the total.

What you will pay tax on

The withdrawal rules changed in June. The tax rules did not, but they are the part most people get wrong, and the forms have changed underneath them.

An EPF withdrawal is exempt once you have completed five years of continuous service, and continuous service is not restricted to a single employer — periods with different employers count together provided the balance was transferred rather than withdrawn. The exemption covers your contribution, the employer’s contribution and the interest on both.

Withdraw before five years and the amount is generally taxable, under Rule 6 of Schedule XI of the Income-tax Act, 2025. TDS applies at 10% where the amount exceeds ₹50,000, rising to 20% if no PAN is on record.

Because the minimum balance keeps a quarter of the account in place, a member who would previously have emptied and closed an account now keeps it open by default — and an account that stays open keeps accruing the continuous service that makes the eventual withdrawal exempt. That is a second-order effect of the floor, and a favourable one.

Why the state did this

The context is in EPFO’s own operating numbers. In FY 2024-25 the organisation settled 6,01,59,608 claims, against total contributions of ₹3,35,628.81 crore and 1,22,89,244 new members enrolled. Six crore claims in a single year describes an institution that a very large number of members treat as a savings account they dip into.

Read against that, the minimum balance is a deliberate intervention in a known behaviour. Every time an account is drained and restarted, the compounding clock goes back to zero, and the member arrives at retirement with a corpus that reflects their last few years of contributions rather than their whole career. The floor is the state deciding that a quarter of the account should be protected from its owner.

That is a paternalistic design. It removes an option people were using. The defence is that the option was frequently being exercised against the holder’s own long-term interest. The criticism is that it binds hardest on people with the fewest alternatives, who reach for provident fund money precisely because nothing else is available.

What to change, if anything

One practical consequence follows directly, and it is the only recommendation in this article.

If any part of your emergency planning assumed that the provident fund was fully reachable after a job loss, that assumption is now wrong by a quarter for the first twelve months. An emergency fund held outside EPF — in something boring and immediately liquid — has to cover more than it used to. The number to size it against is your monthly outgo, not your salary, which for most households is a harder figure to state than it sounds.

Beyond that, the change is mostly an accounting one. EPF was always a retirement asset that happened to be reachable; it is now a retirement asset that is three-quarters reachable. If you are modelling a retirement date, what matters is that the locked core compounds at a declared rate for the whole of your career, which makes it easier to model than the market-linked parts of the projection — the FIRE calculator treats a corpus growing at a stated rate as exactly that kind of input, and the retirement planner handles what happens when several such pots come due at different ages.

It also changes what your EPF balance means inside a total picture. A quarter of it now behaves differently from the rest, and if you are totalling everything you own in one figure, it is worth knowing which part of that line is available this year and which part is not. The same question arises with the assured-pension arithmetic set out in what the Unified Pension Scheme actually assures: in both cases the headline number and the number you can use are not the same number.

Questions worth asking

What is the 25 per cent minimum balance rule in the EPF Scheme 2026?

It is a floor that must remain in your provident fund account after any partial withdrawal during employment. The scheme sets the minimum balance at 25 per cent of the total contributions standing to your credit, and defines the amount you may draw against as the eligible member balance, meaning the total less that floor. In practice partial withdrawals now reach at most about 75 per cent of the account rather than the whole of it.

Can I still withdraw my full PF balance after losing my job?

Not immediately. Up to 75 per cent can be withdrawn on becoming unemployed, and the remaining balance becomes claimable only after twelve months of continuous unemployment. The stated purpose is to keep membership and service continuity intact, which protects pension eligibility. The practical effect is that provident fund money is no longer a complete backstop in the first year after a job loss.

What are the three EPF withdrawal categories under the 2026 scheme?

Essential needs, housing needs, and special circumstances. Essential needs covers illness with no stated cap on frequency, education up to ten times and marriage up to five times across membership. Housing covers purchase, construction, home loan repayment and renovation, up to five times. Special circumstances covers events notified by the Central Board and is available up to twice in a financial year. These three replace the thirteen separate grounds under the 1952 scheme.

Does the EPF Scheme 2026 change how much I contribute?

No. The contribution rate stays at 12 per cent of wages from the employee and 12 per cent from the employer, with a reduced 10 per cent rate continuing for categories of establishment notified by the central government. The statutory wage ceiling is unchanged. The 2026 scheme rewrites the withdrawal rules and the administrative framework, not the amount going in.

When is the locked 25 per cent of my PF released?

On full settlement rather than partial withdrawal. The scheme permits the entire balance to be drawn on retirement at or after the age of 55, on permanent and total incapacity certified medically, on permanent migration abroad, on retrenchment, and on voluntary retirement by mutual agreement. Twelve months of continuous unemployment also opens the remaining balance after the initial 75 per cent has been taken.

Related

Sources

• Ministry of Labour and Employment, Employees’ Provident Funds Scheme, 2026, notification G.S.R. 525(E) dated 29 June 2026, published in the Gazette of India (Extraordinary). The supersession of the 1952 scheme, the making of the scheme under the Code on Social Security, 2020, and its commencement on publication. Retrieved 14 September 2026.
• Press Information Bureau, 239th meeting of the Central Board of Trustees, EPF. The 8.25% rate of interest recommended for FY 2025-26, the approval of the new EPF, EPS and EDLI schemes under the Code on Social Security, 2020, and the FY 2024-25 operating figures used here: total contributions of ₹3,35,628.81 crore, 1,22,89,244 new members enrolled and 6,01,59,608 claims settled. Retrieved 14 September 2026.
• Employees’ Provident Fund Organisation, for member-facing scheme information, contribution rates and the claims process. Retrieved 14 September 2026.
• Ministry of Labour and Employment, Code on Social Security, 2020, the parent legislation under which the 2026 schemes are framed.
• Income Tax Department, Income-tax Act, 2025, for the exemption of provident fund withdrawals after five years of continuous service under Rule 6 of Schedule XI, the 10% and 20% TDS rates on earlier withdrawals, and the replacement of Forms 15G and 15H by Form 121 from 1 April 2026. Retrieved 14 September 2026.
• The auto-settlement figures — the increase in the advance-claim ceiling from ₹1 lakh to ₹5 lakh, the 72-hour credit, the 2.34 crore advance claims auto-settled in FY 2024-25 against 89.52 lakh the previous year, and the rise in the auto-settled share from 31% to 59% — are drawn from EPFO announcements as reported contemporaneously. Retrieved 14 September 2026.
• The withdrawal categories, frequency limits, the twelve-month membership requirement, the ₹1,000 minimum, the 25% minimum balance and the unemployment provisions are drawn from published compliance summaries of the notification, which are cited in the text where they disagree with one another. Where a figure is load-bearing for a decision, confirm it against the notified text.

This is an explanation, not advice about your money. TLDR Money is not a registered investment adviser and earns no commission on any product mentioned. Figures are illustrative; your own numbers, taxes and circumstances will differ.