PF Withdrawal for Home Loan: Process, Rules, Eligibility and More

Buying a house is a significant decision and often requires a substantial investment. If you find yourself short of funds, opting for a home loan becomes essential.  While many banks offer home loans, having a PF account provides an additional option. You can make a PF withdrawal for a home loan. 

Taking money out of your PF to get a home loan can be a good option. It can help cover the cost of buying a property. But, just like a loan, you must meet the eligibility criteria and terms and conditions to qualify for the withdrawal. That is where this article comes in. This article will discuss eligibility, documentation, process, eligibility criteria, rules, and limits to making a smart decision. So, let us get started!

What is a Provident Fund Account (PF)?

A Provident Fund (PF) is a savings plan backed by the government. It is also called a retirement fund. In this plan, workers save some of their earnings until they retire. When they retire, the fund gives them either a big payment all at once or smaller payments every month. 

In India, the group that handles the provident fund is called the Employees’ Provident Fund Organisation (EPFO). The goal is to make sure employees have financial security after they retire.

What are the Rules for a Provident Fund Withdrawal?

Obtaining a PF withdrawal for a home loan involves following specific rules and conditions. These are in place to ensure you use your saved funds for valid and necessary reasons. They are:

1. Withdrawal Limit

You can withdraw up to 90% of your Employee Provident Fund (EPF) balance for home purchases.

2. Service Period

A minimum of five years of service is required to be eligible for PF withdrawal for a house purchase.

3. Tax Implications

Withdrawing your PF before five years of service results in it being taxed under the “Income from other sources” category, with a 10% Tax Deducted at Source (TDS).

4. Joint Purchase

PF withdrawal for purchasing property jointly is not allowed except with your spouse.

5. Ownership

You, your spouse, or both must jointly own the new house.

6. Instalments

PF withdrawal should be done in instalments. Construction should start within six months of the first withdrawal and be completed within 12 months of the last instalment.

7. Property Transaction

If you use a PF withdrawal to buy a house, the property transaction should be completed within six months from the date of the online PF withdrawal.

8. One-time Use

PF withdrawal for housing is permitted only once in a lifetime.

What are the Reasons Under Which You Can Make a Provident Fund Withdrawal?

There can be several PF withdrawal reasons. Some reasons under which you can make a PF withdrawal for a home loan are:

1. Job Loss

If you're out of work for over a month, you can take out up to 75% of your savings. You can withdraw the remaining 25% if you're unemployed for over two months.

2. Education

After contributing to the PF for at least seven years, you can use up to 50% of your total PF savings to pay for your or your children's post-10th-grade education.

3. Marriage

After seven years of contributing to the PF, you can use up to 50% of your savings to cover the costs of your wedding or the wedding of your son, daughter, brother, or sister.

4. Special Needs

If you're a special needs account holder, you can withdraw six months' worth of basic wages and dearness allowance or the employee's share with interest (whichever is less) to pay for necessary equipment.

5. Medical Emergencies

You can use your PF savings to pay for urgent medical treatments for specific diseases for yourself or immediate family members. The amount you can withdraw is restricted to six months of basic salary and dearness allowance or the employee's portion plus interest, whichever is less.

6. Debt Repayment

After contributing to the PF for at least 10 years, you can withdraw an amount equal to 36 months of basic wage and dearness allowance or the total of the employee and employer's share with interest to pay your home loan EMIs.

What is the Eligibility for a Provident Fund Withdrawal for a Home Loan? 

The eligibility for a PF withdrawal for a home loan is as follows:

1. Length of Service

To use your Provident Fund for home loan repayment, your Employees' Provident Fund account must have been active for at least three years after it was opened.

2. Amount you can Withdraw

You can take out up to 90% of the total amount in your EPF.

3. Ownership of the House

The house for which you have taken the loan should be in your and your spouse's names or your name.

What are the Documents Required for a Provident Fund Withdrawal for a Home Loan? 

If you want to take money out of your PF to pay back a home loan, you need to have these required documents with you: 

1. PAN Card

Needed for tax-related matters and to confirm your identity.

2. Aadhar Card or Employer’s Authorization Letter

It is used to verify your identity. Your employer can provide an authorisation letter if you don’t have an Aadhar card.

3. Universal Account Number (UAN) of your PF/EPF account

The UAN is a 12-digit number given to EPF contributors. It helps in managing PF accounts.

4. Bank Account Details

This information transfers the amount you withdraw from your PF account to your bank account.

5. Phone Number

This is used for any necessary communication.

What are the Limits of Provident Fund Withdrawal for a Home Loan? 

The Employees’ Provident Fund (EPF) allows its members to take out money for different needs, one of which is to pay off a home loan. As per Section 68BB of The Employees’ Provident Funds and Miscellaneous Provisions Act, 1952, members can take out as much as 90% of their PF/EPF balance to repay their home loan. The limit of a PF withdrawal for a home loan is as follows:

Purpose of the Withdrawal	Eligibility	Withdrawal Limit
An emergency involving a member, spouse, parent, or kid	Any Member of the PF	Six times the employee's monthly income or the lesser of their portion plus interest
Building / Purchasing a New Home	The worker had to have put in at least 5 years.	90% of the PF Balance
Renovation of the House	You can withdraw after 5 years from the construction of the house	12 times the employee’s monthly salary
Repayment of Home Loan	The employee must have served for min 3 years	90% of the PF Balance
Wedding of member/sibling/children	The employee must have served for min 7 years	50% of the employee’s share plus interest

How to Make a Provident Fund Withdrawal for a Home Loan? 

You may have a question about how to withdraw the PF amount for a home loan. Well, you can make a PF withdrawal for a home loan via 5 methods. They are as follows:

1. Using UAN (Universal Account Number)

Step 1: Visit the EPFO portal and log in using your UAN and the password.

Step 2: Go to the tab for ‘Online Services’ and select ‘Claim (Form-31, 19, 10C)’. Your member details will be displayed on the screen. Verify these details.

Step 3: Click on ‘Yes’ to sign the certificate of undertaking and proceed with the claim.

Step 4: Next, you will be taken to the claim form. From the menu, select ‘PF Advance (Form 31)’.

Step 5: Fill in the necessary details, such as the purpose for which the advance is required, the amount required, and your address.

Step 6: Click on ‘Get Aadhaar OTP’. Enter the OTP received on your Aadhaar-linked mobile number.

Step 7: Click on ‘Validate OTP and Submit Claim Form’. After that, your employer receives your claim for review and approval. Upon approval, the cash will be credited to your bank account.

2. Without UAN

Step 1: Download and fill out Form 19 (for PF withdrawal) and Form 10C (for pension withdrawal).

Step 2: Attach necessary documents, such as a cancelled cheque and a copy of your PAN card.

Step 3: Submit the required documents and form to your employer. Your employer will attest and forward these forms to the regional EPFO office.

Step 4:  The EPFO will process your claim and deposit the amount into your bank account.

3. Through the UAN Portal

Step 1: Visit the UAN portal and log in using your UAN and password.

Step 2: Look for the ‘Manage’ tab and verify your KYC information.

Step 3:  Locate the ‘Online Services’ tab, select ‘Claim’ and then ‘Proceed for Online Claim’.

Step 4: Select ‘PF Advance (Form 31)’ as the claim reason.

Step 5: Fill out the necessary forms and submit them.

Step 6: Your claim is then forwarded to your employer for approval. After approval, the amount will be credited to your banking account.

4. Through the Umang App

Step 1: Download and open the Umang app on your smartphone.

Step 2: Select ‘EPFO’ and then ‘Employee Centric Services’.

Step 3: Select ‘Raise Claim’ and enter your UAN to get an OTP on your registered mobile number.

Step 4: Enter the OTP and select ‘PF Advance (Form 31)’ as the claimed reason.

Step 5: Fill out the designated form and submit it.

Step 6: Your claim is then forwarded to your employer for approval. Once approved, the designated amount will be disbursed to your bank account.

5. Offline

Step 1: Download and fill out Form 19 and Form 10C.

Step 2: Attach necessary documents, such as a cancelled cheque and a copy of your PAN card.

Step 3: Submit the required documents and forms to the regional EPFO office.

Step 4: The EPFO will process your claim and deposit the fund into your account.

What are the Tax Implications of Provident Fund Withdrawal?

The tax regulations for PF withdrawal for home loan repayment vary. These variations depend on several factors, such as your length of service and the specific components of your PF. Understanding these details is important to avoid unexpected tax liabilities.

Components of Provident Fund

Your Provident Fund payout is made up of three parts:

1. Your Contribution/Employee’s Contribution

This is the money you put into your PF. This part of your withdrawal isn’t subject to tax. However, if you’ve claimed a tax deduction under section 80C on your contribution in previous years, you might have to pay extra tax as if you hadn’t claimed the 80C deduction for those years.

2. Interest on Your/Employee’s Contribution

This part is taxed as income from other sources.

3. Employer’s Contribution and Interest on Employer’s Contribution

The contribution from your employer and the interest on it is entirely taxable. It’s taxed under the salary category in your tax return.

Tax on PF Withdrawal Before 5 Years

If you withdraw from your PF before completing 5 years of continuous service, Tax Deducted at Source (TDS) will be deducted. The whole amount withdrawn is taxable. The monthly provident fund deduction is split into two parts: your contribution and a matching contribution by your employer. The employee’s contribution can be deducted Section 80C of the Income Tax Act applies to taxable income.

Tax on PF Withdrawal After 5 Years

If you withdraw the money from your PF account after 5 years of continuous service, the entire amount, including the principal and interest you withdrew, is tax-free.

Using PF withdrawal for a home loan is a big financial step. It can help buy or build a house, but you should think about how it might affect their retirement savings and look at other ways to finance the purchase.

NoBroker is a popular realty platform which can assist you in securing loans with other banks or NBFCs. We will assist you so that you do not have to worry about the various phases of the process and lengthy application process. So, get in touch with us and let us help you get your dream home today!

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