PF and ESI for Foreign Owned Companies and Expat Staff in 2026

Written by CA Nandini, Krystal7 Consultants. Last updated 1 October 2026.

A foreign owned company in India registers for provident fund (PF) at 20 employees and for Employees' State Insurance (ESI) at 10. Both thresholds come from the Code on Social Security, 2020. PF is 12 percent of wages from each side, on wages up to INR 25,000 a month from 17 Sep 2026. ESI is 3.25 percent plus 0.75 percent for staff earning up to INR 21,000. Expats join PF from day one, usually on full pay, unless a social security agreement exempts them.

This page covers registration, rates, the wage base, the international worker rules for expats, social security agreements, monthly dates and penalties. It ends with a worked example for a French engineer on INR 60,00,000 a year, with and without a certificate of coverage.

When must a company register for PF and ESI?

A company must register for PF once it employs 20 or more people, in any industry. It must register for ESI once it employs 10 or more people. Both thresholds sit in the First Schedule to the Code on Social Security, 2020. Foreign ownership changes nothing.

The Code took effect on 21 Nov 2025 under S.O. 5319(E). It replaces nine central Acts, including the Employees' Provident Funds and Miscellaneous Provisions Act, 1952 and the Employees' State Insurance Act, 1948. S.O. 5319(E) held back the PF contribution clauses and left the 1952 Act unrepealed on that date. PF then moved across in stages during 2026.

The ministry's Compliance Handbook for Employers lists both thresholds and leaves seasonal factories outside ESI. The 1952 Act reached only listed industries, so the PF net is now wider, as the PIB factsheet of 22 Nov 2025 notes.

Three rules decide how you count:

• Every employee counts. That includes fixed term staff, probationers and expats. A 19 person team that hires one expat reaches 20.
• Contractor staff matter. Section 17(1) of the Code lets the principal employer recover PF paid for a contractor's employees from that contractor. We count them when testing the threshold, as the safer course.
• Coverage sticks. Under section 1(8) of the Code, a Chapter keeps applying even if headcount later falls below the threshold.

The PIB factsheet also allows voluntary ESI membership below 10 employees where employer and employees agree. For voluntary PF below 20, ask the EPFO regional office before you plan on it.

The same factsheet says the Code extends ESIC coverage across India by removing the old notified area limit. ESIC still rolls out benefits district by district, so ask your ESIC branch office how it is collecting in your district.

Registration runs through the Shram Suvidha portal under rule 5 of the Social Security (Central) Rules, 2026 (G.S.R. 344(E) of 8 May 2026). EPFO issues an establishment code and ESIC an employer code. We register in the month the 20th or 10th employee joins.

Point	PF (EPFO)	ESI (ESIC)
Law	Code on Social Security, 2020, Chapter III; EPF Scheme, 2026; EPS, 2026; EDLI Scheme, 2026	Code on Social Security, 2020, Chapter IV; ESI (General) Regulations, 1950 so far as they fit the Code
Headcount trigger	20 or more employees	10 or more employees
Who must join	Employees with Code wages up to INR 25,000 a month when they join; every international worker	Employees with Code wages up to INR 21,000 a month
Employer rate	12% of wages, plus EDLI and administration charges	3.25% of wages
Employee rate	12% of wages	0.75% of wages
Wage base	Code wages, capped at INR 25,000 unless a higher base is chosen	Code wages
Due date	Within 15 days after the month ends	Within 15 days after the month ends
Benefits	Provident fund, pension, life cover	Medical care, sickness, maternity, disablement, dependants' benefit
Expats	Mandatory from day one unless excluded under a social security agreement	Rarely, because expat pay exceeds INR 21,000

What are the PF and ESI contribution rates?

Under paragraph 18(2) of the Employees' Provident Funds Scheme, 2026, PF is 12 percent of wages from each side. The employer also pays for EDLI life cover and administration charges. ESI is 3.25 percent from the employer and 0.75 percent from the employee, 4 percent in all.

Section 16(1)(a) of the Code sets PF at 10 percent. Its first proviso lets the Centre substitute 12 percent for notified establishments, and S.O. 3582(E) of 1 Jul 2026 uses that proviso. Paragraph 18(2) keeps 10 percent only for categories the Centre notifies. For a typical foreign owned subsidiary, the rate is 12 percent.

The employer's 12 percent is split. Paragraph 4 of the Employees' Pension Scheme, 2026 sends 8.33 percent of wages, up to the ceiling, to the pension fund. At INR 25,000 that is INR 2,083 a month. Under paragraph 7, a new member qualifies for EPS only with wages at or below the ceiling. A new hire above it puts the whole 12 percent into PF.

EDLI is the Employees' Deposit Linked Insurance Scheme. Paragraph 5(2) of the EDLI Scheme, 2026 leaves the rate to notification by the Centre. The ministry's Annual Report 2023-24 put the employer's EDLI contribution at 0.5 percent. Paragraph 29(1) of the EPF Scheme, 2026 likewise leaves PF administration charges to the Centre. Use the rates EPFO's ECR applies for the month, and check them after any notification.

The EDLI scheme pays at least INR 50,000 on a member's death in service (paragraph 21(2)). With 12 months of continuous employment, paragraph 21(4) sets a range of INR 2,50,000 to INR 7,00,000.

ESI rates have stood at 3.25 and 0.75 percent since 1 Jul 2019. The PIB release of 13 Jun 2019 cut them from 4.75 and 1.75 percent. ESIC's regional office pages still state these rates. They also exempt employees on a daily average wage of up to INR 176 from the employee share; the employer still pays its own.

Component	Employer	Employee	Base	Source
EPF	12% of wages, less any EPS share	12% of wages	Code wages up to INR 25,000, or a higher base	EPF Scheme, 2026, para 18; S.O. 3582(E)
EPS	8.33% of wages up to INR 25,000, out of the employer's 12%	Nil	EPS members only	EPS, 2026, paras 4 and 7
EDLI	Rate notified by the Centre (0.5% under the 1976 scheme)	Nil	Wages up to the ceiling	EDLI Scheme, 2026, para 5(2)
PF administration	Rate notified by the Centre	Nil	As the ECR computes	EPF Scheme, 2026, para 29(1)
ESI	3.25%	0.75%	Code wages, for staff up to INR 21,000	PIB, 13 Jun 2019; ESIC

What wages count for PF and ESI?

Both use "wages" as defined in section 2(88) of the Code on Social Security, 2020, called Code wages here. Code wages include basic pay, dearness allowance and retaining allowance. If excluded items such as HRA exceed half of total remuneration, the excess counts as wages. PF then caps the base at INR 25,000 a month.

Our guide to the new labour codes works through the 50 percent test. Four points matter most here:

• Employer PF and pension contributions sit inside total remuneration for the test (Additional FAQ 1 of 16 Mar 2026). So PF and Code wages depend on each other.
• ESOPs, RSUs, performance incentives, variable pay and reimbursements are not wages (FAQ 3 of 30 Dec 2025).
• A fixed special allowance is disputed. The ministry's FAQ tests it inside the 50 percent pool. The statutory text would count it as wages in full.
• Remuneration in kind counts as wages up to 15 percent of total wages.

Paragraph 18(3) of the EPF Scheme, 2026 makes contributions subject to the wage ceiling the Centre notifies. The ceiling became INR 25,000 a month on 17 Sep 2026. Under paragraph 9(4), employer and employee can jointly choose a higher base.

Foreign currency pay converts at the State Bank of India telegraphic transfer (TT) buying rate. The Explanation to paragraph 18 uses the rate on the last working day of the month in which the wages are paid. Some expats also receive pay from the home payroll. If that pay is for work in India, we include it in Code wages and keep the records ready for inspection.

The ministry's Additional FAQs of 16 Mar 2026 apply Code wages to ESI coverage from 21 Nov 2025 (FAQ 12). The INR 21,000 limit stays. Code wages can be lower than the old ESI wages, which counted most allowances. Because Code wages are at least half of total remuneration, check everyone earning up to INR 42,000.

Item	PF	ESI
Wage definition	Section 2(88) of the Code	Section 2(88) of the Code (Additional FAQ 12)
Limit	INR 25,000 a month from 17 Sep 2026; INR 15,000 before	INR 21,000 a month for coverage
Above the limit at joining	Excluded employee, unless an international worker	Not covered
Higher base	Joint request under para 9(4)	Not available
International workers	Full Code wages under the 1952 practice; the 2026 text is unclear	Same rule as other employees
Foreign currency pay	SBI TT buying rate, last working day of the wage month	No separate ESIC rule found; we use the PF rate
ESOPs, RSUs, variable pay	Not wages	Not wages

We compute ESI contributions on the same Code wages. Ask your ESIC branch office to confirm the base it applies.

How does the INR 25,000 ceiling change PF?

S.O. 5109(E) raised the PF wage ceiling from INR 15,000 to INR 25,000 a month from 17 Sep 2026. Statutory PF for capped staff rises from INR 1,800 to INR 3,000 a month on each side. Employees with Code wages up to INR 25,000 now join PF compulsorily. International workers raise a separate question, covered below.

The Union Cabinet approved the change on 16 Sep 2026 (PIB). The ministry's release of 23 Sep 2026 calls it the first revision since September 2014. It says more than 51 lakh workers come into mandatory coverage.

The pension share inside employer PF moves from INR 1,250 to INR 2,083 a month. Membership widens too. The excluded employee test in paragraph 2 looks at wages when the employee becomes entitled to join. So a new hire on INR 22,000 must now join.

EPFO's FAQs on the revised ceiling split September 2026. Days 1 to 16 use INR 15,000 and days 17 to 30 use INR 25,000. Both go in one ECR, due by 15 Oct 2026. The FAQs let you recover the extra employee share in the next payroll.

An Indian hire above INR 25,000 at joining can stay outside PF. A hire with an existing UAN may already be a member, and EPFO may expect membership to continue. Ask every new hire for their UAN first and check the history with EPFO.

What is an international worker?

An international worker is an employee of an establishment in India who holds a passport other than an Indian one. The term also covers an Indian employee who has worked or is working in a country that has a social security agreement with India. Nepalese and Bhutanese nationals count as Indian workers.

The definition sits in paragraph 2 of the Employees' Provident Funds Scheme, 2026, G.S.R. 525(E). Paragraph 2(g) of the EPS, 2026 (G.S.R. 527(E)) uses the same words. The category began as paragraph 83 of the EPF Scheme, 1952, through notifications of 1 Oct 2008 and 3 Sep 2010. The 2026 scheme spreads it across paragraphs 2, 9 and 10.

The test is the passport, not residence or origin. That catches some finance teams out:

• An Overseas Citizen of India (OCI) cardholder with a US or UK passport is an international worker.
• A foreign national hired locally by the Indian subsidiary is an international worker.
• An Indian engineer posted to the parent in Germany or Japan is an international worker too.

We record the passport country for every hire at onboarding. It decides membership, the wage base and how the employee can withdraw. Ask EPFO which KYC documents it accepts for an expat without Aadhaar before the first ECR.

Do expats on Indian payroll pay PF?

Yes. An expat employed by an Indian establishment covered by PF is an international worker. Paragraph 9(5) of the EPF Scheme, 2026 makes membership mandatory from the date of joining, whatever the salary. Under the 1952 scheme, employers paid PF on the expat's full pay. The only exit is excluded employee status under a social security agreement.

Under paragraph 9(5), a member under the 1952 scheme stays a member. A new hire joins from the first day. An excluded worker joins when the exclusion ends.

The Delhi High Court judgment of 4 Nov 2025 describes the old rule. Foreign employees had to become members "irrespective of the monthly pay they draw". Indian employees above the ceiling did not. EPFO's practice was to collect on full pay.

The 2026 text is less clear, and we found no EPFO clarification by 1 Oct 2026. Here is what the gazette says:

• Paragraph 18(3) makes every member's contributions subject to the notified wage ceiling. It has no carve out for international workers.
• Paragraph 9(4) lets employer and employee jointly choose a higher base.
• Paragraph 9(6) is the only text on an international worker's wage base. It applies to workers linked to a country in its table, today only the UK, who claim detached worker status. They contribute on total wages under section 2(88) of the Code.

So one reading caps an expat's PF at INR 25,000 like anyone else's. Secondary commentary disagrees on the point. The conservative course is to keep paying on full Code wages until EPFO says otherwise in writing. Underpaying brings arrears, damages and interest; overpaying only builds the employee's balance. We follow the conservative course.

The courts split on the old paragraph 83. The Karnataka High Court struck it down in 2024 in Stone Hill Education Foundation v Union of India, through a Single Judge. On 4 Nov 2025, a Division Bench of the Delhi High Court upheld paragraph 83 and the withdrawal rule in paragraph 69(2). It dismissed the SpiceJet and LG Electronics India Private Limited petitions.

The Delhi court declined to follow the Karnataka ruling, which had not weighed the reasons for the classification. Neither ruling reads the 2026 text. Watch for any appeal to the Supreme Court.

If the Indian company pays or reimburses a secondee's cost, we treat the secondee as its international worker, even on the parent's payroll. The secondment terms also bear on tax, covered in our note on permanent establishment risk.

Full pay PF can create taxable income for the expat. Clause (h) of section 17 of the Income Tax Act, 2025 covers employer contributions to PF, NPS and superannuation. Any amount above INR 7,50,000 in a tax year is a perquisite. Clause (i) adds the yearly interest on that excess. The department's salary guidance also taxes interest on employee contributions above INR 2,50,000 a year.

Rule	Indian employee	International worker without a certificate	International worker with a certificate of coverage
Membership	Mandatory if Code wages are up to INR 25,000 at joining	Mandatory from the first day, whatever the pay (para 9(5))	Excluded employee while the certificate is valid (para 2)
PF base	Capped at INR 25,000 unless a joint request	Full Code wages on the conservative reading	Nil in India; home scheme continues
Pension (EPS)	Member if wages are within the ceiling at joining (para 7)	Same test under para 7; para 36 adds SSA service	Not a member
Withdrawal	General rules of the scheme	At 58, on permanent and total incapacity, or as an SSA allows	Not applicable
Monthly reporting	ECR	ECR, flagged as an international worker	Keep the certificate on file; ask EPFO what it wants reported
ESI	If Code wages are up to INR 21,000	Same	Same; SSAs do not cover ESI
Gratuity	Code on Social Security, Chapter V	Same	Same; the India France SSA does not cover it

How do social security agreements and certificates of coverage work?

A social security agreement (SSA) lets an employee posted between two countries stay in the home scheme for a fixed period. An expat from an SSA country who holds a certificate of coverage from the home authority is an excluded employee in India. That expat pays no PF while the certificate is valid.

Paragraph 2 of the EPF Scheme, 2026 defines an excluded employee in two ways. The first is an employee above the ceiling when entitled to join. The second covers an international worker who contributes to the home country's scheme as a citizen or resident, in two cases:

1. India has a reciprocal SSA with that country, and the worker has "detached worker" status under it.
2. India signed a comprehensive economic agreement with that country before 1 Oct 2008 that exempts its nationals from host country contributions.

The second case is generally read as aimed at the India Singapore Comprehensive Economic Cooperation Agreement of 2005. We found no EPFO statement on it, so check before relying on it.

For inbound expats, the home country authority issues the certificate. The Indian employer keeps a copy for the whole posting and shows it to EPFO on inspection. Under Article 8 of the India France agreement, a posted employee stays under French law for up to 60 months. Each agreement sets its own limit. When a certificate lapses, paragraph 9(5) makes PF membership start at once.

For outbound staff, EPFO issues the Indian certificate. The employee should be a PF member with the Indian employer. Apply through EPFO well before the posting starts.

The UK and India Double Contributions Convention took effect on 15 Jul 2026 (PIB, 17 Jun 2026). The UK government's explainer says detached workers stay in their home scheme for up to 60 months. It covers contributions only, not benefits such as the UK State Pension.

The UK is the only country in the table to paragraph 9(6) of the EPF Scheme, 2026. Under it, an international worker linked to the UK who claims detached status contributes on total wages. The UK explainer says Indian detached workers will pay into the EPF scheme amounts similar to UK National Insurance. So we read paragraph 9(6) as aimed at Indian employees posted to the UK.

A full SSA also counts periods in both countries towards pension. Article 11 of the India France agreement does this. Paragraph 36 of the EPS, 2026 adds SSA service to actual service and pays pension under the agreement.

EPFO's own list of agreements was not reachable when we checked on 1 Oct 2026. The table uses government releases instead, so confirm the exact in force date with EPFO before you rely on one.

Country	Status in official releases	Source
Belgium, Denmark, France, Hungary, Luxembourg, Netherlands, Republic of Korea, Switzerland	Operative by Jan 2014	PIB, 9 Jan 2014
Germany	Operative by Jan 2014; a partial agreement in 2016	PIB, 9 Jan 2014; Embassy of India, Tokyo, 21 Jul 2016
Austria, Australia, Canada, Czech Republic, Finland, Norway, Sweden	Operational by Jul 2016	Embassy of India, Tokyo, 21 Jul 2016
Japan	In force from 1 Oct 2016	Embassy of India, Tokyo, 21 Jul 2016
Portugal	Signed; not yet operational in Jul 2016	Embassy of India, Tokyo, 21 Jul 2016
United Kingdom	In force from 15 Jul 2026; contributions only; up to 60 months	PIB, 17 Jun 2026; UK government
Other signed agreements	India had signed with 21 countries by 2023-24	MoLE Annual Report 2023-24

None of these official lists includes the United States, the UAE or Singapore. Expats from those countries pay PF in full unless EPFO accepts an exclusion.

When can an international worker withdraw PF?

An international worker can withdraw PF on retirement from service after 58, or on retirement for permanent and total incapacity. A worker from an SSA country can also be paid as that agreement provides. A worker from a country without an SSA, such as the United States, cannot withdraw on leaving India.

These grounds come from paragraph 69(2) of the 1952 scheme, which the Delhi High Court upheld on 4 Nov 2025. Ask EPFO how the 2026 scheme words them before you brief an expat. Paragraph 10(2) of the 2026 scheme keeps an international worker a member until one of three events:

1. The worker withdraws the full balance.
2. The establishment comes under an exemption under section 143 of the Code or paragraph 12 of the scheme.
3. Benefits are settled under the SSA with the worker's home country.

For SSA countries, payment follows the agreement. Article 11 of the France agreement totalises insurance periods for pension. EPFO's FAQs add that SSA workers can take pension in their home country. Where totalised service stays under 10 years, they receive an EPS withdrawal benefit. Ask EPFO about payment to a foreign bank account before the expat leaves.

The balance earns interest while it waits. EPFO credited 8.25 percent for 2024-25, according to the ministry's annual report for 2025-26.

Does ESI apply to expats and to foreign owned companies?

ESI applies to every establishment with 10 or more employees. It covers each employee whose Code wages are INR 21,000 a month or less. Expats rarely fall within that limit. Indian office assistants, drivers and junior hires often do.

Section 32 of the Code lists ESI benefits: sickness, maternity, disablement, dependants', medical and funeral expenses. A group health policy does not replace ESI for covered staff.

ESI works in six month contribution periods, from April to September and October to March. Ask the ESIC branch office how it treats a pay rise above INR 21,000 in the middle of a period.

SSAs do not help with ESI. Article 2 of the India France agreement lists, for India, only old age, survivors' and permanent total disability pensions. An expat within the ESI limit is covered whatever the passport.

New ESI (General) Regulations under the Code had not been notified in final form by 1 Oct 2026. Until they are, the 1950 regulations continue so far as they fit the Code. Watch for the final text, because it will restate due dates and damages.

What are the monthly PF and ESI filing dates?

PF and ESI are both due within 15 days after the month ends, so by the 15th of the next month. For PF, the employer uploads the electronic challan cum return (ECR) and pays against it. ESI contributions follow the same date.

Paragraph 28(3) of the EPF Scheme, 2026 requires electronic payment within fifteen days of the close of each month. Paragraph 24(2)(ix) sets the same window for the monthly return. Paragraph 6 of the EDLI Scheme, 2026 matches it. For ESI, regulation 31 of the 1950 regulations sets 15 days from the last day of the calendar month.

We pay two working days early, because a bank transfer that fails on the 15th makes the month late.

When	What to do	Rule
By the 7th	Pay the previous month's wages	Code on Wages, section 17(1)
By the 7th	Deposit TDS on salaries	Income Tax Rules, 2026, rule 218(2)
Before the first ECR	Generate or link a UAN and an ESI number for each new joiner	EPFO and ESIC portals
By the 15th	Upload the ECR and pay PF, EPS, EDLI and charges	EPF Scheme, 2026, paras 24 and 28; EDLI Scheme, 2026, para 6
By the 15th	Pay ESI contributions	ESI (General) Regulations, 1950, regulation 31
15 Oct 2026	September 2026 ECR, split at 17 Sep between INR 15,000 and INR 25,000	EPFO wage ceiling FAQs
On each expat's arrival	File the certificate of coverage, or enrol the expat in PF	EPF Scheme, 2026, paras 2 and 9(5)
30 days before a certificate lapses	Prepare PF enrolment from the expiry date	EPF Scheme, 2026, para 9(5)

For the full list across tax, GST and corporate filings, see our 2026-27 compliance calendar for foreign owned companies.

What are the penalties for late PF and ESI?

Late PF and ESI attract interest and damages under the Code and the schemes. PF damages run from 0.25 to 1 percent a month of the arrears under paragraph 23 of the EPF Scheme, 2026. ESIC now charges a flat 1 percent a month. Keeping a deducted employee share can bring one to three years in prison under section 133 of the Code.

Paragraph 23 grades PF damages by the length of delay, as the table shows. Interest is charged on top; ask EPFO or ESIC for the computation on any arrears. For ESI, the ministry's Annual Report 2025-26 says ESIC replaced its graded damages, which reached 25 percent a year, with a uniform 1 percent a month.

Section 133 punishes an employer who deducts the employee's share and does not deposit it. The term is one to three years, with a fine of INR 1,00,000. The PIB factsheet describes a 30 day improvement notice before prosecution. Section 138 allows compounding, but not for a repeat within three years.

An employee's PF or ESI share paid after the due date is not deductible for the employer. The Supreme Court held this under the Income Tax Act, 1961 in Checkmate Services Private Limited on 12 Oct 2022. Check the matching provision of the Income Tax Act, 2025 with your tax adviser before claiming a late deposit. The auditor also reports late deposits under clause 3(vii) of CARO, covered in our note on the statutory audit of a foreign owned subsidiary.

Default	Consequence	Source
PF or ESI paid late	Interest, on top of damages	Code on Social Security
PF late by under 2 months	Damages at 0.25% a month of arrears	EPF Scheme, 2026, para 23
PF late by 2 months to under 4 months	Damages at 0.50% a month	EPF Scheme, 2026, para 23
PF late by 4 months or more	Damages at 1% a month	EPF Scheme, 2026, para 23
ESI paid late	Damages at 1% a month	MoLE Annual Report 2025-26
Employee share deducted, not deposited	Imprisonment of 1 to 3 years and fine of INR 1,00,000	Code, section 133
First lapse	30 day improvement notice before prosecution	PIB factsheet, 22 Nov 2025
Compounding	Allowed, not for a repeat within 3 years	Code, section 138
Employee share paid after the due date	Not deductible for the employer's income tax	Supreme Court, Checkmate Services, 12 Oct 2022

Take INR 5,00,000 of PF paid three months late. Damages at 0.50 percent a month come to INR 7,500, and interest comes on top. Our EPFO compliance service files the ECR before the 15th so neither starts.

What changed in 2026

PF and ESI moved to the Code in stages. The table lists each change by date and instrument.

Date	Old position	New position	Instrument
4 Nov 2025	Karnataka High Court had struck down paragraph 83	Delhi High Court Division Bench upheld paragraph 83	SpiceJet and LG Electronics judgment
21 Nov 2025	EPF Act, 1952 and ESI Act, 1948	Code on Social Security in force; PF contribution clauses of section 16(1) held back	S.O. 5319(E)
21 Nov 2025	ESI coverage on ESI Act wages	ESI coverage tested on Code wages, limit INR 21,000	MoLE Additional FAQ 12 of 16 Mar 2026
8 May 2026	Rules under the old Acts	Social Security (Central) Rules, 2026	G.S.R. 344(E)
29 Jun 2026	EPF Scheme, 1952, paragraph 83	EPF Scheme, 2026; international worker rules in paragraphs 2, 9 and 10	G.S.R. 525(E)
29 Jun 2026	EPS, 1995	EPS, 2026, paragraphs 2(g) and 36	G.S.R. 527(E)
29 Jun 2026	EDLI Scheme, 1976	EDLI Scheme, 2026; cover from INR 50,000 to INR 7,00,000; rate by notification	G.S.R. 526(E)
1 Jul 2026	12% rate under the 1952 Act	12% rate under the first proviso to section 16(1)(a), effective from 21 Nov 2025	S.O. 3582(E)
15 Jul 2026	No UK agreement; UK secondees paid full PF	UK convention in force; detached workers exempt up to 60 months	India UK Double Contributions Convention
17 Sep 2026	INR 15,000 ceiling	INR 25,000 ceiling; September 2026 split at 17 Sep	S.O. 5109(E); EPFO FAQs

The PIB release of 2 Sep 2026 records that the EPF Scheme, 2026 was notified on 29 Jun 2026. Paragraph 1 brings it into force on publication in the Gazette.

Worked example

A French engineer employed by a French parent is seconded to its Indian Private Limited subsidiary in Bengaluru from 1 Oct 2026. The posting is for three years. The subsidiary pays INR 60,00,000 a year, or INR 5,00,000 a month.

Component	INR a month	Treatment under section 2(88)
Basic pay	3,00,000	Wages
House rent allowance	2,00,000	Excluded, clause (f)
Fixed pay	5,00,000
Employer PF at 12% of INR 3,00,000	36,000	Excluded, inside the 50% test
Total remuneration for the test	5,36,000

Step 1. Test Code wages. Half of total remuneration is INR 2,68,000. The excluded pool is INR 2,36,000 (2,00,000 + 36,000), which is below half. Code wages are INR 3,00,000 a month. With no special allowance, both readings of the 50 percent rule agree.

Step 2. Check the passport. A French passport makes the engineer an international worker under paragraph 2 of the EPF Scheme, 2026.

Step 3, Case A: no certificate of coverage. Paragraph 9(5) makes the engineer a PF member from 1 Oct 2026. On the conservative full pay reading, the base is INR 3,00,000.

• Employee PF is 12 percent of INR 3,00,000, or INR 36,000 a month.
• Employer PF is INR 36,000 a month. Wages exceed the ceiling, so paragraph 7 of the EPS, 2026 keeps the engineer out of EPS. All of it goes to PF.
• EDLI is INR 125, assuming the 0.5 percent rate of the 1976 scheme on INR 25,000 continues.
• Administration charges come on top, at the rate the ECR applies.

The subsidiary's monthly cost before administration charges is INR 36,125, or INR 4,33,500 a year. Take home pay falls by INR 36,000 a month. The account gains INR 8,64,000 a year, or INR 25,92,000 over three years before interest.

If the ceiling did apply to international workers, the base would be INR 25,000. Employer cost would be INR 3,125 a month (3,000 + 125). That is INR 33,000 a month less, or INR 3,96,000 a year. We do not budget on that reading until EPFO confirms it.

Step 3, Case B: certificate of coverage. The French parent obtains a certificate from the French social security authority under Article 8 of the India France agreement. It covers 1 Oct 2026 to 30 Sep 2029, inside the 60 month limit. The engineer is an excluded employee under paragraph 2. Indian PF is nil, and French contributions continue through the parent.

Monthly figures (INR)	Case A: no certificate	Case B: certificate of coverage
Code wages	3,00,000	3,00,000
Employee PF deducted	36,000	Nil
Employer PF	36,000	Nil
EDLI	125	Nil
Administration charges	At the notified rate	Nil
Employer cost in India, before administration charges	36,125	Nil
Employer cost in India, a year	4,33,500	Nil
French social security	Check with the parent's French payroll	Continues under French law
ESI	Not covered; wages above INR 21,000	Not covered

Step 4. Look at the exit. In Case A, France has an SSA with India, so payment follows the agreement and EPFO's rules for SSA workers. In Case B, nothing sits in India to withdraw.

Step 5. Check tax. Employer PF of INR 4,32,000 a year is under the INR 7,50,000 perquisite limit. Employee contributions of INR 4,32,000 exceed INR 2,50,000, so interest on the INR 1,82,000 excess is taxable. Clause (h) of section 17 sets the INR 7,50,000 limit; the INR 2,50,000 limit comes from the department's salary guidance.

Step 6. Plan for overrun. A certificate cannot run past 30 Sep 2031, the 60 month limit. From 1 Oct 2031, paragraph 9(5) makes the engineer a PF member.

Scenario 2: a US engineer. A US national takes the same role on the same pay. India has no SSA with the United States, so no certificate exists. Employer cost matches Case A at INR 36,125 a month before administration charges.

The difference is the exit. The engineer cannot withdraw on leaving India, only at 58 or on permanent and total incapacity. A 35 year old who leaves after three years waits 20 years for the money. Tell US hires this before they sign.

Scenario 3: ESI for an Indian assistant. An office assistant earns INR 38,000 a month. Basic pay is INR 17,000, HRA INR 8,500, conveyance INR 6,500 and leave travel allowance INR 6,000. All three allowances are excluded heads.

Employer PF sits inside the 50 percent test, so we solve for wages. Code wages equal half of (INR 38,000 + 12 percent of wages), which gives INR 20,213. That is below INR 21,000, so ESI applies although gross pay is INR 38,000. On our Code wages base, the employer pays INR 657 and the employee INR 152 a month, each rounded up. Under the old ESI wages, this assistant was outside ESI.

Common mistakes

1. Treating OCI cardholders as Indian employees. The test is the passport. Fix: record passport nationality at onboarding and flag every foreign passport.
2. Applying the INR 25,000 ceiling to an expat. EPFO collected on full pay under the 1952 scheme, and the 2026 text is unclear. Fix: contribute on full Code wages until EPFO says otherwise in writing.
3. Relying on a promised or lapsed certificate of coverage. Exclusion needs a certificate for the actual dates, and membership starts when it expires. Fix: obtain it before arrival and diary every expiry date.
4. Telling a US or UAE hire they can withdraw PF on leaving. Without an SSA, withdrawal waits until 58. Fix: explain this in the offer letter.
5. Ignoring home payroll for Indian work. Pay for work in India counts. Fix: add it to Code wages at the SBI TT buying rate.
6. Testing ESI on gross pay. Additional FAQ 12 uses Code wages. Fix: retest staff earning up to INR 42,000.
7. Leaving the PF ceiling at INR 15,000. It rose on 17 Sep 2026. Fix: split the September 2026 ECR and update the payroll master.
8. Paying on the 15th itself. A failed transfer makes the employee share late and non deductible. Fix: pay two working days early.
9. Missing outbound staff. An Indian employee posted to an SSA country is an international worker. Fix: apply for an Indian certificate of coverage before the posting.

Checklist

1. Count employees, including expats and contractor staff, against the thresholds of 20 for PF and 10 for ESI.
2. Ask the ESIC branch office how ESI runs in each district where you have an office.
3. Record each employee's passport nationality and mark every international worker.
4. Compute Code wages for every employee, with employer PF inside the 50 percent test.
5. Apply the INR 25,000 ceiling to Indian staff from 17 Sep 2026, and split September 2026 in one ECR.
6. Retest ESI coverage on Code wages for staff earning up to INR 42,000.
7. Collect a certificate of coverage before each expat from an SSA country starts work.
8. Enrol every international worker without a valid certificate from the first day, on full Code wages.
9. Convert foreign currency pay at the SBI TT buying rate on the last working day of the wage month.
10. Diary every certificate expiry and the 60 month limit for France and the UK.
11. Apply to EPFO for a certificate of coverage before posting Indian staff abroad.
12. Upload the ECR and pay PF, EDLI, charges and ESI two working days before the 15th.
13. Brief expats in writing on withdrawal rules and PF tax.
14. Track EPFO guidance on the 2026 wage base for international workers and the final ESI regulations.

For a review of your expat payroll, our payroll management team can check one sample payslip per category through our contact page.

Frequently Asked Questions

Is PF mandatory for a foreign owned Private Limited company with 15 employees?+

No, not until it employs 20. The First Schedule to the Code on Social Security, 2020 applies Chapter III to establishments with 20 or more employees. Ask EPFO if you want to join earlier. Once covered, section 1(8) of the Code keeps it covered even if headcount later falls below 20.

Is ESI mandatory if all 12 employees earn more than INR 21,000?+

Yes, we register it. Chapter IV applies at 10 employees, and rule 5 of the Social Security (Central) Rules, 2026 requires registration on the Shram Suvidha portal. Contributions are payable only for employees whose Code wages are up to INR 21,000. Test Code wages, not gross pay, as Additional FAQ 12 of 16 Mar 2026 requires.

Is an OCI cardholder an international worker for PF?+

Yes, if the person holds a foreign passport. Paragraph 2 of the EPF Scheme, 2026 defines an international worker by passport, not by origin or residence. An OCI cardholder with a US passport joins PF from the first day under paragraph 9(5), unless an SSA certificate excludes them.

Can an expat opt out of PF in India?+

Not by choice. Paragraph 9(5) of the EPF Scheme, 2026 makes membership mandatory for international workers. The only exception is excluded employee status under paragraph 2. That needs a certificate of coverage under a social security agreement, such as those with France or Japan. The UK convention also qualifies from 15 Jul 2026.

Does the INR 25,000 PF ceiling apply to international workers?+

The text is unclear. Paragraph 18(3) of the EPF Scheme, 2026 makes all contributions subject to the ceiling, with no carve out for international workers. Only paragraph 9(6) requires total wages, for UK linked detached workers. EPFO collected on full pay under the 1952 scheme. Until EPFO clarifies, we contribute on full Code wages, the safer course on inspection.

Is PF payable on an expat's pay from the foreign parent?+

Usually yes, if the pay is for work in India and the Indian company is the employer. We count total pay for the Indian work, wherever it is paid. The Explanation to paragraph 18 of the EPF Scheme, 2026 converts foreign currency pay. It uses the SBI TT buying rate on the last working day of the wage month.

How long can a French secondee stay outside Indian PF?+

Up to 60 months. Article 8 of the India France social security agreement keeps a posted employee under French law for that maximum period. The French certificate must cover the dates. When it ends, paragraph 9(5) of the EPF Scheme, 2026 makes the employee a PF member immediately.

Does the UK convention exempt UK secondees from Indian PF?+

Yes, for detached workers from 15 Jul 2026, for up to 60 months, with a UK certificate. The UK and India Double Contributions Convention covers contributions only and gives no pension totalisation. UK staff hired locally by the Indian subsidiary pay full PF as international workers.

Can a US national withdraw PF when leaving India?+

No. India has no social security agreement with the United States. A US international worker could withdraw only on retirement after 58 or on permanent and total incapacity under paragraph 69(2) of the 1952 scheme. Confirm the 2026 wording with EPFO. The balance keeps earning interest in the meantime.

Do Singapore nationals pay PF in India?+

PF applies by default, because they are international workers and India has no SSA with Singapore. Paragraph 2 of the EPF Scheme, 2026 also excludes workers covered by a pre 1 Oct 2008 economic agreement with a specific exemption. Check EPFO's current view of the 2005 India Singapore CECA before relying on it.

Do social security agreements cover ESI or gratuity?+

No. India's agreements deal with contributions to its PF and pension schemes. Article 2 of the India France agreement lists only old age, survivors' and permanent total disability pensions for India. An expat within the INR 21,000 ESI limit is covered, and gratuity under Chapter V of the Code on Social Security still applies.

What is the PF due date for September 2026?+

15 Oct 2026. EPFO's FAQs on the revised ceiling split September 2026. Days 1 to 16 use INR 15,000 and days 17 to 30 use INR 25,000. Both go in a single ECR. Paragraph 28(3) of the EPF Scheme, 2026 requires payment within 15 days after the month ends.

What damages apply if PF is paid three months late?+

Paragraph 23 of the EPF Scheme, 2026 charges 0.50 percent a month for a delay of two months to under four months. On INR 5,00,000 of arrears that is INR 7,500 for three months. Interest comes on top. ESI arrears now carry a flat 1 percent a month instead.

Is an employee's PF share paid late deductible for income tax?+

No. In Checkmate Services Private Limited, decided on 12 Oct 2022, the Supreme Court held such a late deposit not deductible under the Income Tax Act, 1961. That covers an employee's PF or ESI share paid after the scheme due date. The auditor also reports the delay under CARO clause 3(vii). Pay before the 15th to keep the deduction.

Sources

• Gazette of India, Employees' Provident Funds Scheme, 2026, G.S.R. 525(E), 29 Jun 2026, https://egazette.gov.in/WriteReadData/2026/273957.pdf
• Gazette of India, Employees' Pension Scheme, 2026, G.S.R. 527(E), 29 Jun 2026, https://egazette.gov.in/WriteReadData/2026/273951.pdf
• Gazette of India, Employees' Deposit Linked Insurance Scheme, 2026, G.S.R. 526(E), 29 Jun 2026, https://egazette.gov.in/WriteReadData/2026/273942.pdf
• Gazette of India, S.O. 3582(E) under the first proviso to section 16(1)(a) of the Code on Social Security, 1 Jul 2026, https://egazette.gov.in/WriteReadData/2026/274112.pdf
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