Get loan from EPF

Financial emergencies or requirement can come at any time of a person’s life. To make life easier there are many banks and NBFCs that provide secured – loans provided with a security or unsecured – loans provided without any security. Getting these loans will take some time and there are chances of your loan getting rejected.

Here is an option that must be only used as a last resort to help with your financial needs, which you don’t need to pay back ever.

Employee Provident Fund(EPF) loan
If you are a salaried person then you must be having this thing called PF where each month your employer will deduct a certain amount from your salary and your employer will also contribute the same amount, well that is what we are going to discuss about here. This is a nest egg that the Government has made mandatory so that employees when they retire have funds in their hand for their expenses.

The Government understanding that there could be extraneous circumstances where a person may need funds to manage a financial situation and so have allowed people to take a loan out of the PF for certain specific reasons.

The reason we tell to use this as a last resort is because

1. This fund in some cases is your retirement fund. You will hamper your chances of having a happy retired life if you use it before hand

2. There are several conditions and rules that need to be satisfied in order for the funds to be accessible

Rules and situations to utilize PF
The Government has stipulated some very specific situations for utilizing the PF funds before retirement. Each situation has its own conditions which needs to be satisfied. They are

Rules for withdrawal of PF amount before retirement
1. You must fulfill the minimum service need for each category or situation. The duration of the service is total i.e. duration of each job is added to this calculation, given that you have transferred your PF accounts to the new job. Now you can transfer the PF amount easily by using your UAN.

2. There is a limit on the amount you can withdraw for each category or situation. It can be up to 36 times of your wages (Basic + DA). The maximum amount for              withdrawal depends upon the reason of PF withdrawal.

The reason for withdrawal and the rules
(a)    Marriage
 You can withdraw the PF amount for the marriage of yourself, son, daughter, brother or sister. The minimum service period is 7 years and you can withdraw up to 50% of the total employee contribution. You can use this reason 3 times in your life.

(b)    Education

You can withdraw fund for the education of self and children, where you should have completed a total service of 7 years. You can avail up to 50% of the employee      contribution. This option can also be used 3 times in a lifetime.

(c)     Medical treatment

You can withdraw from your PF account for the treatment of self, spouse, children and parents. The patient should have been hospitalized for more than a month. If the claimant is the employee, he/she should have taken leave from the organization. For certain ailments in the case of TB, leprosy, paralysis, cancer, mental derangement or heart ailment advance can be availed without hospitalization. You can take 6 times of wages (Basic + DA) or total employee share, whichever is less. There is no limit on the frequency with which this reason.

(d)    Purchase or construction of home

You can withdraw from PF account for the purchase of a home or construction of the house only once. You must have completed 5 years in service and the property should be registered in the name of self or jointly with spouse where the property should not have any joint owner of property other than the spouse. You can avail this loan at 36 times of wage (Basic + DA) for this purpose.

(e)    Purchase of plot

PF money can be used for buying a plot of land which can be availed only once. The minimum service requirement is at least 5 years. The property should not have any co-owner other than the spouse. 24 times of wages (Basic +DA) can be availed before which a declaration be submitted with the application.

(f)     Remodeling or addition in the house

This can be availed only once and you must have completed 5 years in service. The property is eligible only if it is more than 5 years old and the property must be owned by you or jointly owned only with your spouse. You can get up to 12 times your wages.

(g)    Repair of House

This can be availed only once and you must have completed 5 years in service. The property is eligible only if it is more than 10 years old and the property must be owned by you or jointly owned only with your spouse. You can get up to 12 times your wages.

(h)    Company lockout

If you did not get wages for at least two months or if your company is locked out or closed for at least 15 days, you can take a loan from EPF. You can get the amount equal to that of your unpaid wages provided there is balance left in the employee contribution. If lockout has been continued for more than 6 months, you can also use the employer’s contribution.

You can apply for the partial withdrawal of EPF from the EPFO online portal where the withdrawal form is available. EPFO has come up with a new form where they ask for very less information provided and where the approval of the employer not required provided the UAN activated and Aadhar linked.