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  • Loan Against PF

    Buying or refurbishing a house can be quite a task for most of the working class. Usually taking a house loan with a never-ending tenure is usually the only option for most people, as buying or renovating a house isn’t a small task and requires a lot of money. Luckily, if you know your way around, there are numerous ways of seeing the end of the loan, and one of them is by making a withdrawal from your Provident Fund savings. The Employee’s Provident Fund organization has allowed employees to make partial withdrawals from their accounts, and one of the reason an employee can do so is to buy or renovate one’s house. That said, making a withdrawal from the Employee's Provident Fund(EPF) to buy or renovate a house comes with a few conditions:

    • Firstly, a withdrawal made towards buying or renovating a house can be made only after five years of complete service. Partial withdrawals in this case are free of tax.
    • Secondly, the withdrawal for the house (either to buy or renovate) should be either on your name or your spouse’s or a joint ownership of the property.
    • Next, once you have made a withdrawal to construct a house, the construction should begin within six months and end within twelve months from the point of making the withdrawal.
    • To buy an already existing house or flat, the purchase has to be made within six months from the point of making the withdrawal.
    • The same goes with refurbishing one’s house. One has to refurbish their house within six months of making the withdrawal.
    • To begin the process of making a withdrawal from the Employee’s Provident fund for the purpose of buying or purchasing a house, one has to fill in Form 31 (the form to facilitate withdrawals from one’s PF savings) and submit the EPF declaration form - which states the reason why the employee is making a withdrawal. In this case, the reason would be to buy or renovate one’s house.

    Listed below is the eligibility criteria and maximum amount one can withdraw from their PF account for cases such as buying or renovating one’s house:

    Construction or buying a house/flat

    For those employees who want to buy or construct a new house or flat, utilizing their savings in their PF can make the process a little easier. An employee is eligible to make a withdrawal towards this purpose when he/she has completed 5 years of complete service. The partial withdrawal is then tax-free. That said, this type of withdrawal from one’s PF savings can be made only once and the property should be under the name of the employee, his/her spouse or a joint venture. The maximum amount that can be withdrawn from an employee’s Public Provident Fund(PF) savings in this case is 36 times the current wages of the employee. In other words, the withdrawal amount can be 36 times the basic salary of the individual.

    Repaying housing loan

    For employees who want to advance the closure of their housing loan, they can do so by taking loan against PF or withdrawing their savings from their PF account. However, this can be done only once and the withdrawal can be made once the employee has completed 10 years of complete service. That said, the maximum withdrawal an employee can make to repay his/her housing loan is 36 times the current wages of the employee.

    To purchase a site/plot

    Not just buying or renovating a house, employees can also make withdrawals from PF accounts for the purpose of buying a site or a plot. An employee should have completed at least 5 years of complete service to avail this option. Yet again, the site or plot should be under the name of the employee or his/her spouse. Lastly, the maximum an employee can withdraw from their PF savings is 24 times the wages - which is their basic salary into 24. If an employee doesn't have that much in their PF savings, the closest available amount can be withdrawn.

    Refurbishing or making alterations to house

    For those who want to give their house a new look, they can look to their PF savings as a tool to make this happen. The property like in every other case of making a PF withdrawal should be under the name of the employer, or his/her spouse. Once the employee has completed 5 years of complete service, he/she is eligible to make a withdrawal from their PF savings to refurbish or remodel their house. The withdrawal limit is curtailed to 12 times the wages of the employee. Which is, the basic salary of the employee into twelve.

    To repair house

    For those employees who are cash strapped and have no other source of funds to get their house repaired, one’s PF account savings could comes as a savior. This option can be availed when the employee has completed 5 years of complete service and ten years after the house has been constructed. The maximum amount one can withdraw from their PF savings for the reason of repairing one’s house is 12 times the current wages of the employee.

    The purpose of buying, renovating or repairing one’s house is not the only reason for an employee to make a withdrawal from his/her PF savings. An employee can make withdrawals in cases such as funding one’s marriage, education or covering their medical expenses. The withdrawals in this case can be made after the employee has completed a minimum of 5 years of complete service. Withdrawals made before 5 years are subject to tax.

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