Provident Fund (PF) is a vital fulcrum of savings and investments for the future, especially retirement. Contributions are made both by the employer and employee for this purpose. If you have been seeking a loan against PF, it is definitely possible to obtain the same. You can withdraw funds from your own PF account as a loan for various purposes.
Partial withdrawals are allowed if the loan is for repairing or buying a house. Contributions that are made towards the EPF scheme will help salaried employees withdraw a lump sum amount when they retire.
Yet, employees are allowed to partially withdraw money throughout the course of their employment duration.
This money may be used as a loan if there are any financial emergencies to take care of. Yet, an extensive verification procedure is conducted by the EPFO for ensuring the validity of the application in question.
Post successful verification, employees may take any partial or advance withdrawal against their EPFO accounts. The important thing to note here is the employee will have to be employed in service for at least 5 years to have eligibility for the loan against pf balance.
Reasons for Availing Loan Against PF
A few reasons why employees may avail of a loan against employee provident fund include the following:
- Educational purposes
- Repayment of home loans
- Home renovation or construction
If employees want to get any loans or advances, their KYC (know your customer) details should be properly linked to their UANs or Universal Account Numbers.
How to Get a Loan Against the Provident Fund?
Getting a loan against provident fund is not difficult although you should keep a few procedures in mind. Withdrawals represent advances instead of loans. Advances may be taken throughout your employment duration based on specific conditions. Along with the reason behind obtaining the advance, the number of years of service for the employee will also count immensely.
Here are some aspects to keep in mind:
- The advance form /form 31, should be carefully submitted in tandem with other vital documents for getting this loan successfully approved.
- The procedure for availing of the loan may be completed upon the EPFO portal itself.
- Employees should make use of their UAN login for the portal in question. Yet, people can only log in if the UAN activation procedure has been completed.
PF Loan Rules
The key rules and regulations for EPF advances that should be followed include the following:
- Based upon the PF withdrawal category, an employee should have finished a specific number of years in service.
- The service period completed by the employee in every organization will be computed for working out the overall service. Yet, the PF amount of the older organization should be transferred to the new Member ID in this case.
- Employees may use their UAN for completion of this procedure for fund transfer.
- The monetary amount that you can withdraw will also vary on the basis of the kind of withdrawal made.
- Depending upon the category, you can withdraw up to 36 times of DA and basic salary.
Conditions for Getting a Loan Against PF Balance
There are several regulations so that people do not frequently withdraw money. The key goal behind this is to ensure that people end up saving some money for their retirement at least.
Here are some of the conditions to be kept in mind.
- For marriages, up to 50% of the employee’s EPF contribution may be withdrawn and the money can be withdrawn for the marriage of the EPF holder, his/her siblings, and children.
- EPFO members should have finished 7 years of service at least.
- For illnesses, withdrawals may be done for medical treatment of the EPF member, parents, spouse, or children.
- The full contribution of the employer or 6 months’ DA and basic salary, whichever is lower, may be withdrawn. No minimum service period is needed in this scenario.
Some Other Conditions that You Should Note
- For buying or building a house, EPFO members should have completed 5 years of service at least.
- The property should be held in the EPFO member’s name or his/her spouse or even under joint ownership.
- Only a single withdrawal will be allowed in this case.
- The total employee and employer contributions or 36 times the basic salary and DA of the employee, whichever is lower, may be withdrawn.
- Up to 50% of contributions made by EPFO members may be withdrawn for educational purposes.
- Up to 3 withdrawals may be allowed and money may be withdrawn for post-matriculation educational purposes of the children of the EPFO member.
- EPFO members should have been in service for a minimum of 7 years.
- EPFO members can withdraw money as an advance for buying land if they have completed 5 years of service and the property should be in the member’s name or his/her spouse’s name or jointly owned.
- Only a single withdrawal is allowed in this scenario.
- The total contributions made by employee and employer or 24 times of basic salary and DA, whichever is lower, may be withdrawn.
Documents Required
- Form 19 – In the case of the final settlement.
- Form 10C – In the case of pension withdrawal benefit.
- Form 31 – It is the case of partial withdrawal of EPF.
EPF Loan Calculator
The EPF calculator assists to calculate the sum of money your PF account accumulates on retirement. The interest rate and balance of EPF loans could be calculated with the EPF Loan calculator.
The interest on the principal is calculated according to the contribution made by the employee and the employer. You also would have to enter other information like current age, retirement age, and more.
Loan Status
The members that have applied for an advance loan on the PF account can check the status with a simple process. However, the member needs to have the PF account number to check the status. The status of your loan can be checked on the EPFO portal. EPF members that avail of advances would not have to pay back the money. Additionally, EPFO members need only EPF money as the last resort as it can be saved for retirement.