The EPF (Employees' Provident Fund) is a long-term investment fund that helps employees build their retirement corpus over the years. EPF contributions are made by the employee and the employer (in some cases, by the government as well). The EPF acts as a safety net to individuals on their retirement, helping them use the accumulated funds as a replacement for the salary they received from work.
While EPF is primarily intended as a retirement corpus, there are certain situations where you can make early withdrawals from the fund. The early withdrawals are termed as EPF loans. However, unlike regular loans, you do not have to repay the amount. Instead, it’s deducted from your EPF funds. Hence, EPF withdrawals can be termed as an advance more than a loan.
Here, in this guide, you can find all that you need to know about EPF withdrawals – eligibility, conditions, and more.
When can you take a loan from EPF?
There are plenty of unexpected situations in life where you meet with financial emergencies. However, unlike personal loans where you can use the loan amount for any purpose, EPF loans are available only under certain conditions.
The EPFO allows premature withdrawals (or advances/loans) from your PF account, for nine reasons.
You can withdraw from your PF account to pay for the higher education of self, children, or sibling.
Early PF withdrawals are permitted to meet the marriage expenses of self, daughter or son.
With increasing medical costs, it’s become difficult to handle the expenses of a medical emergency out of pocket. The EPFO permits loans for medical treatment of self, son, daughter, spouse or dependent parents.
For the Purchase of a Plot/home or the construction of a Home
EPF withdrawals are permitted for purchase of a house or a plot. However, there are additional terms and conditions before you can withdraw for this purpose.
Home Loan Payments
EPF withdrawals are permitted if you are having a hard time paying your home loan repayments.
While the EPFO permits withdrawal of funds for home renovation purposes, it's usually discouraged, and you may not be eligible.
Natural calamities like floods, cyclones, tsunamis can lead to the devastation of personal property. In such cases, EPF loans are provided to rebuild your property and to meet other expenses.
During a lockout, you may not receive a salary from your employer. You can make partial withdrawals from the EPF account to meet your regular expenses. To be eligible, your company must have been locked out or closed for at least 15 days, and you should not have received a salary for at least two months.
The EPFO permits withdrawal of a significant amount of your corpus one year before retirement, to pay for your retirement home, etc.
EPF Loans Eligibility Criteria for Various Reasons
Besides the reasons mentioned above, several other conditions must be met before you can withdraw funds from your EPF. The number of years the employee has completed in service also plays a crucial role in determining whether your EPF loan application is approved or denied.
Here you can find the minimum service condition and the maximum funds that can be withdrawn for each of the reasons mentioned above.
|Reason for EPF Loan||Withdrawal Limit||Minimum Service Criteria||Maximum Frequency for using the Reason|
|Natural calamity||50% of the employer’s share||
Nil – No minimum service criteria
|Pre-retirement||90% of the total funds||Only once|
|Medical treatment||6 times the wage (DA + Basic salary)||No limit|
|Company lockout||Equal to your unpaid wages||No limit|
|Purchase of a plot||24 times the wage (DA + Basic salary)||
Minimum 5 years of service
|Home construction/Purchase of home||36 times the wage (DA + Basic salary)|
|Home Renovation||12 times the wage (DA + Basic salary)|
Up to 50% of the accumulated funds
Minimum 7 years of service
Up to 3 times
|Home loan repayment||90% of the accumulated funds||
Minimum 10 years of service
|Home Repair||12 times the wage (DA + Basic salary)|
How to take a loan from your EPF account?
Though EPF withdrawals are commonly referred to as loans, strictly speaking, it’s more of an advance. You can avail the advance if you face any one of the nine reasons mentioned above.
You can apply for an EPF early withdrawal while you are working. The amount advanced depends on the specific situation. For instance, you can withdraw up to 50% of the accumulated funds for the marriage of your daughter/son and 90% of the accumulated funds for home loan repayment. Additionally, the number of years you have spent in service (working) also plays a crucial role in determining the sanctioned amount.
Steps to avail an EPF Loan (or Early Withdrawal):
Download Form 31 (EPF Advance Form) from the official website of the EPFO.
Fill the form and submit it to your employer along with the required documents. For instance, if you need a loan for a marriage, you have to provide the marriage invitation along with the form. Form 31 requires you to submit your PAN number, salary details, bank account number and other details.
Your employer forwards the form along with the relevant documents to the EPFO.
Your request is processed at the EPFO.
If your request is approved, the sanctioned amount is debited from your EPF account and credited directly to the attached savings bank account.
Alternatively, you can complete the steps mentioned above online, using the EPFO website. To do so, you have to log in to the portal using your UAN login ID and password. Look for the section on early withdrawals and provide the required details. However, note that online application is possible only when you have completed the UAN activation process.
How to check EPF loan status?
Once you have applied for an EPF loan to your employer or at any branch of the EPFO, you can check the status of your request online. To do so, all you need is to provide the EPF account number. You can quickly check whether your application is approved or denied.
Additional Reading: How to Check EPF Balance Online
Avail EPF Loans with Due Caution
An EPF loan can indeed pull you out of a financial emergency. Compared with regular loans, there is no interest levied on the borrowed amount. Also, you don't have to repay the borrowed amount.
All this makes it tempting to use EPF withdrawals to meet all your emergency cash requirements. However, make sure that you opt for an EPF loan only as a last resort, as every withdrawal you make erodes your retirement corpus. So, practise due caution and opt for EPF loans, only when you absolutely need it.