Loan Against PF Last Updated : 19 Jul 2019

An individual having a PF account can withdraw funds from the account as loan. Partial withdrawal is possible in case the loan is towards buying/repairing a house. The employee should be in service for 5 years to be eligible to get loan against PF.
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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.

Minimum Number of Years of Service that Employees must Complete 

For employees to avail a loan against their PF account, they must complete a minimum number of years of service. Given below is the list of situations when EPF loans that can be taken after completing a certain number of years of service: 

  1. Number of years of service is not required 
    • Pre-retirement 
    • Calamity 
    • Medical treatment 
  2. At least 5 years of service 
    • Addition or Alteration in house 
    • Construction of house 
    • Buying a house or plot 
  3. At least 7 years of service 
    • Marriage 
    • Education 
  4. At least 10 years of service 
    • Repair of home 
    • Home loan repayment 

PF Withdrawal Rules 

Complete withdrawal of PF amount is allowed if an individual is unemployed for more than 2 months. However, in case of partial withdrawal of PF, an employee must fulfil certain conditions. Given below is the list of cases where partial withdrawal is allowed and the number of years of service an employee must complete: 

  1. Withdrawal for marriage: Partial withdrawal of PF is possible in case of the PF member’s marriage. PF withdrawal can be made in case of the marriage of PF member’s son, daughter, brother, or sister. However, the member must at least complete 7 years of service and can withdraw up to 50% of his/her contribution towards PF. The facility to withdraw in case of marriage can be availed a maximum of 3 times in total. 
  2. Withdrawal for education: Partial withdrawal is possible for the education of the PF members or their children. The member must complete at least 5 years of service and 50% of his/her contribution can be withdrawn. The member can use this facility 3 times in total. 
  3. Advance for medical treatment: An advance in PF can be availed in case of medical treatment for the PF members, their children, parents, and spouse. However, the hospitalisation must be for more than a month and if the member is claiming the advance, he/she must be on leave from the organisation. Advance for medical treatment is provided in case of mental derangement, cancer, paralysis, leprosy, and tuberculosis. Advance is also provided for heart ailments even without hospitalisation. Members can take an advance of up to 6 times their wages or their total contribution, whichever is less. However, there is no limit on the number of times an advance can be taken. 
  4. Company lockout: Loan on PF can be availed if members have not been receiving their salary for the last two months and the company that they are working for has been closed or locked out for a minimum of 15 days. The amount that can be availed is the total wages that have been unpaid. In case the organisation has been closed for more than 6 months, the employer’s share can also be withdrawn. 
  5. Prior to retirement: Individuals must have completed at least 57 years of age and retirement must be only 1 year later, from the time the amount is being withdrawn. Employees can withdraw up to 90% of the total balance. However, a certificate from the employer must be provided with the date of retirement mentioned on it. 
  6. Calamity: There is no minimum number of years of service a member should complete in case of PF withdrawals due to a calamity. However, members must submit a certificate of damage that has been provided by a competent authority. 50% of the employee’s contribution can be withdrawn.  

Form and Process for PF Advance 

The process for PF withdrawal is very simple and can be done online. EPF advance can also be done online. However, employees must activate their Universal Account Number (UAN) and it must be linked with their Aadhaar and bank account.  

The form that is required for EPF withdrawal and advance is Form 31. It is also known as ‘Advance Form’ and is used for advances, withdrawal, and loans from the member’s EPF account. However, a certain amount of money must be retained in the account in order to withdraw the money. In case the member does not utilise the EPF amount, it must be refunded along with the interest. Relevant proof must also be submitted to the EPFO in case of certain EPF loans or withdrawals. 

Status of Loan 

Status of claim can be found online with the help of the PF number. Withdrawal of the PF amount is considered as an advance and not a loan. Employees who take an advance do not have to pay back the money. 

FAQs

  1. What are the different types of withdrawal forms available on the Universal Account Number (UAN) portal?
  2. Given below are the three types of withdrawal forms available of the UAN portal:

    • Form 19: PF final settlement form
    • Form 10-C: Pension withdrawal form
    • Form 31: PF partial withdrawal form
  3. Do employees need to submit the form they have generated online for a claim to the employer?
  4. No, employees need not submit the form to their employers.

  5. In the case of the online filing of Form 31, what are the service requirements?
  6. The employee’s date of joining must be mentioned on the Employees’ Provident Fund Organisation (EPFO) portal to claim for partial withdrawals online.

  7. Do employees need to authenticate any claims they file online?
  8. Employees who file for a claim online will need to authenticate it by an OTP that is sent to their registered mobile number.

  9. What is the procedure for employees to claim for withdrawal online?
  10. Mentioned below is the step-by-step procedure to file for a claim online:

    • You will need to log in to the EPFO portal using your UAN and password.
    • You must make sure that your number of years of service and KYC details for eligibility are met.
    • Choose the relevant form for withdrawal.
    • You will receive an OTP on your registered mobile number. On entering the OTP, your claim will be processed.
  11. How long does it take for the claim to be settled?
  12. According to the Employees Provident Fund (EPF) scheme, settlement of a claim usually takes 20 days.

  13. Is it possible for employers to join the PF?
  14. No, employers are not allowed to join the PF.

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