When looking to buy a new home, you can consider withdrawing your PF. You can withdraw your Provident Fund money from the employee PF account under certain conditions. Read on to learn how to finance your new home with PF withdrawal.
Have you ever considered withdrawing your PF to finance a new home? That is a convenient and easy option. Continue reading for more information on how to do pf withdrawal.
When it comes to buying a new home, one of the most important considerations is financial planning. While some home buyers use surplus funds or savings, others obtain a home loan to purchase their dream home. However, there is one intriguing yet underexplored method for financing your home. It is done through provident fund money or PF withdrawal. However, one must understand how to conduct pf withdrawal.
For the uninitiated, EPF stands for Employee Provident Fund, also known as Provident Fund. When a homebuyer is struggling to finance a home purchase, the money saved in the Provident Fund can come in handy. According to the PF withdrawal rules, provident fund withdrawal or PF withdrawal is permitted for the purchase or construction of a home, as well as the repayment of a home loan used to finance the purchase. (PF Withdrawal Online)
What is PF, or Provident Fund Account?
The Provident Fund is a government-managed retirement scheme for salaried employees. The Provident Fund system requires that both the employer and the employee contribute to the employee’s PF account. It is contributed in equal parts by the employer and employee. The provident fund contribution equals 12% of the basic salary and dearness allowance. (PF Withdrawal Online)
The primary goal of the Provident Fund (PF) is to provide a lump sum payment to the employee when he or she retires. However, according to the rules of withdrawal, this accumulated wealth can be withdrawn prematurely, for example, when buying or building a home, purchasing land, or repaying a mortgage. (PF Withdrawal Online)
What are the conditions for PF Withdrawal for Home Purchase?
People are aware of the concept of PF withdrawal, but they are unsure how to proceed. The provident fund system was primarily intended to provide a secure retirement income for salaried employees. However, the accumulated funds can be withdrawn for home purchases. If you want to check your EPFO balance, go to UAN login (pf withdrawal login) and look at the EPFO member passbook.
According to the newly introduced provision number 68BD in the ‘Employees Provident Fund Scheme’ 1952 rules of PF withdrawal, an employee is eligible for PF withdrawal for the purpose of purchasing a house, plot or building a house. (PF Withdrawal Online)
Partial PF Withdrawals
Partial PF withdrawals are easier to obtain than complete withdrawals. Here are the reasons why you can avail of a partial BF withdrawal:
Medical Purposes – For medical reasons, you may withdraw a portion of your PF for yourself, your spouse, children, or parents. The amount must be less than or equal to a six-month basic salary or the employee’s total share. There are no service requirements for this.
Marriage – Marriages can be paid for with a 50% withdrawal of employee contributions. The minimum service period is seven years.
Education – A loan equal to 50 percent of an employee’s contribution can be obtained for educational purposes, similar to marriage. A minimum of seven years of service is required.
Purchase of house or land:- PF can be withdrawn to purchase land or a house. Withdrawal is permitted once during service, and at least five years of service are required.
Home Renovation – A minimum of five years of service is required to obtain a PF withdrawal for home renovation. It can be used twice: after five years and after ten years of house completion.
Home Loan Down Payment – You can use your PF withdrawal to cover the down payment or initial deposit required to purchase a home. This alleviates the burden of arranging a large sum of money upfront.
Before Retirement – You can withdraw up to 90% of your PF amount before retirement. This benefit is only available to employees with at least 58 years of service.
PF Withdrawal for Plot Purchase.
If a salaried person wishes to take a PF Withdrawal to purchase a plot for house construction, the PF Withdrawal will be 24 months of Basic Salary plus Dearness Allowance (DA) or the cost of the plot, whichever is less.
PF withdrawal for a ready-to-move-in house
If the person wishes to withdraw PF for the purpose of purchasing a ready-made house, the PF withdrawal will be 36 months of the employee’s basic salary plus Dearness Allowance (DA), or the cost of the house, whichever is less.
PF Withdrawal for House Repairs or Renovation
If a person wants to use PF withdrawal to improve or renovate his home, he can withdraw 12 months of basic salary and Dearness Allowance (DA) or the cost of repairing work, whichever is less. (PF Withdrawal Online)
However, certain conditions apply to the PF Withdrawal for House Construction.
Other Reasons for PF Withdrawal
After learning how to do PF withdrawal, let’s look at some of the factors that contribute to PF withdrawal. Aside from home purchase or renovation, PF withdrawal can be made in the following cases:-
Someone has reached the age of retirement.
A female employee resigns due to marriage, pregnancy, etc.
If an individual is migrating to another country
If an individual has been unemployed for more than 60 days, or two months
Conditions of PF Withdrawal for House Construction
Although the Provident Fund is an excellent option for funding a home purchase, there are a number of conditions associated with PF withdrawal, and the rules of PF withdrawal must be followed. The following are the most common conditions for withdrawing PF for a home purchase.
Whether the PF withdrawal is for land purchase, ready-to-move property, or repairing and renovating an existing property, it will be limited to 90% of the EPF balance.
Only people who have completed at least five years of service are eligible to withdraw their PF benefits.
If the PF withdrawal is made before the five-year period from the date the account was opened, the law requires it to be taxable. This withdrawal will be taxable under the ‘Income from other sources’ category. A 10% TDS will be applied to the withdrawn amount.
It should be noted that the PF withdrawal for joint purchase is not applicable to anyone other than your spouse.
The newly built house must be owned by the employee, their spouse, or both.
The PF withdrawal must be made in installments. Furthermore, construction of the house must begin within six months of the withdrawal of the first installment. The construction should also be completed within 12 months of the last installment drawn.
If you are purchasing a house with the funds from a PF withdrawal, you must complete the transaction within six months of the date of the PF withdrawal online.
The PF withdrawal for housing is permitted only once in a lifetime.
House Construction by a Member of the Cooperative Society/Housing Society.
In addition to the aforementioned benefits, the EPFO enables a member of a registered society or a housing society to withdraw PF funds for housing construction or plot purchase. Let’s take a look at the specific rules of PF withdrawal for house construction.
According to section 68BC of the EPF scheme and the rules of pf withdrawal, a member of a registered society or a housing society (with a minimum of ten members) may withdraw the Provident Fund balance for home purchase or house construction. The PF Withdrawal can also be used to purchase land for the construction of a home. This plot can be purchased from the central government, the relevant state government, or a registered agency. However, there is one condition attached to this facility. In such cases, the PF withdrawal will be the lower of 90 percent of the Provident Fund balance and the actual cost of the purchased property. (PF Withdrawal Online)
In addition to this clause, there is one more important condition that applies to this type of PF withdrawal online.
According to the rules for PF withdrawal, the employee must have completed at least five years of service and contributions to his PF fund. Furthermore, the share of contributions with interest in the PF balance, together with the spouse who is also a member, must be at least Rs 20,000. This is necessary for PF withdrawal in this case.
PF Withdrawal for Repayment of Home Loan
According to the rules of PF withdrawal, the PF withdrawal or PF balance can also be used to pay off the home loan. According to section 68-BB of the EPF scheme, the PF balance can be withdrawn and used to repay an outstanding loan taken by the member or his or her spouse.
However, such withdrawals are limited to the equivalent of 36 months’ basic salary and Dearness Allowances (DA). In addition, the employee must have completed at least ten years of service to be eligible for this option. (PF Withdrawal Online)
Furthermore, the home loans obtained in this case must have come from registered financial institutions with the
State government
Public Financial Institutions
Non-banking Housing Finance Companies
State Housing Boards
Municipal Corporations
PF Withdrawal for Home Loan Down Payment
Individuals in India can withdraw their EPF to make a down payment on a home loan. To be eligible for this withdrawal, the individual must be a member of a recognised EPF and meet certain employment status and years of service requirements.
For example, Ms. Sharma has been an EPF member for over five years and intends to purchase a home. She can use a portion of her EPF savings to cover the down payment on her home loan. The amount she can withdraw is determined by specific guidelines, and she must adhere to the current rules when making the withdrawal.
PF withdrawal for a specific purpose, such as a home loan down payment, must be accompanied by relevant documents, such as:
Agreement to Purchase the House
Loan sanction details from the bank.
Before making such a withdrawal, it is important to consider the tax implications.
PF Withdrawal Offline
PF withdrawals can be completed offline by submitting a Composite Claim Form to the EPFO office. The Composite Claim Form is available at the nearest EPFO office and is divided into two types: Aadhar and Non-Aadhaar. PF Withdrawal Offline
The Composite Claim Form (Aadhar Form) is used when the Aadhar card and bank details are linked to a UAN account. In this case, you will not need the employer’s attestation.
Composite Claim Form (Non-Aadhar Form): If Aadhar and bank details are not linked to a UAN account, the Non-Aadhar form is used. You will need to have it attested by the employer.
Once completed, submit the form to the EPFO office. If you forget or misplace your UAN number, the same procedure will be followed.
How do I make a PF withdrawal for home buying online?
An individual can easily apply online for a PF withdrawal for housing purposes. Follow the instructions above to apply for PF withdrawal online.
Step 1: Log in (pf withdrawal login) to EPFO’s official portal and link your Aadhar number to your Universal Account Number (UAN).
Step 2: Complete the PF withdrawal form online.
Step 3: Submit your personal and bank account information.
Step 4: Following departmental checks, the funds will be credited to your account within 15 working days. (PF Withdrawal Online)
What documents are required for PF withdrawal?
When an EPFO member wishes to make a PF withdrawal, along with the process of pf withdrawal, the following documents are mandatory for the EPFO member:
The most important requirement is to have a Universal Account Number, or UAN. The UAN is listed in the EPFO member passbook or can be obtained from the employer.
Bank account information (similar to Passbook) for the EPFO member. The EPFO member name must be consistent across both the EPFO member account and the bank account.
Money cannot be transferred to a third party while an EPFO member is alive, so the bank account must be in his or her name.
The EPFO member’s personal information must be identical in both the identity proof and the EPFO member account.
Umang App: PF Withdrawal Mobile Application
The Umang app is a mobile application developed by MeitY, the Government of India. The mobile application provides a number of useful online services, including PF withdrawal. With this pf withdrawal mobile application, users can quickly access multiple pan-India e-Gov services provided by various government agencies and local bodies, as well as Central and State Government services.
Listed below are a few key features and benefits of the Umang mobile application that assist users in initiating a simple PF withdrawal process online.
Simple Navigation: The mobile application’s homepage includes an EPF button, which users can click to access pf withdrawal services. The mobile application’s simple navigation allows users to upload documents and submit applications with ease.
Real-time updates: The mobile application not only allows users to apply for PF withdrawal for home purchases, but it also allows them to check the status of their current application. To check the status of their PF withdrawal application, they only need to provide their application number and registered mobile number.
Secure and Scalable: The mobile application includes a secure, encrypted database with enhanced data security measures. Users logging into the mobile application have limited access to data depending on the type of account they are using.
How to Withdraw PF Using the Umang App?
Below are a few simple steps you can take to apply for PF withdrawal through the Umang mobile application.
Step 1: Download the Umang mobile app from your preferred app store, such as the Apple App Store or Google Play.
Step 2: On the Umang app’s homepage, click the EPFO Services button (PF withdrawal login).
Step 3: Choose the Employee Centric option and click the Raise Claim button.
Step 4: Enter your Universal Account Number (UAN).
Step 5: Select the type of withdrawal and enter the one-time password sent to the registered mobile number.
Step 6: Click the Submit button and take note of the reference number generated for your application. Your reference number will also be sent to you via SMS.
To place a PF withdrawal request through the Umang app, you must have an active Universal Account Number and a mobile number linked to your Aadhar.
How Do I Check My PF Withdrawal Status on the Umang App?
Once you’ve completed the PF withdrawal process, use the Umang app to check the status of your application.
Step 1: Launch the Umang app on your smartphone to make PF withdrawals online. If not, you can download it from your preferred app store, such as the Google Play Store or the Apple App Store.
Step 2: From the Umang app homepage, click on the EPFO button.
Step 3: Select the Track Claim button from the list of services on the next page.
Step 4: Enter your Universal Account Number and the OTP that was sent to your registered mobile number.
Step 5: Once completed, you will see the status of your claim displayed on your screen.
How to Find the Nearest PF Withdrawal Office Using the Umang App
Here are a few simple steps to find the nearest EPFO office and make an offline PF withdrawal.
Step 1: Launch the Umang application that you downloaded to your smartphone.
Step 2: From the Umang app homepage, click on the EPFO button.
Step 3: Scroll down to the General Services section and select the Search EPFO Office button.
Step 4: Enter your location information, such as state and district.
Step 5: Click the Submit button.
Step 6: Gather a list of all EPFO offices in your chosen district. To apply for an offline PF withdrawal, go to the nearest branch.
The Tax Implications of PF Withdrawal for House Construction
The PF withdrawal for housing has tax implications. When an employee withdraws a lump sum for house construction, the amount is exempt under Section 10 (12) of the Income Tax Act 1961. It is contingent on the employee completing five or more years of continuous service.
How many times can an employee apply for a PF withdrawal for house construction?
EPF subscribers have the option of withdrawing funds to help them with their home-buying expenses. However, this facility is only available once in a lifetime.
Should I withdraw PF for house construction?
Even if employees have the option of withdrawing their PF, experts advise against doing so. The Provident Fund scheme was designed primarily to provide a retirement benefit. This fund will provide excellent support during your retirement years. While you are still working, getting a home loan and repaying it is preferable to withdrawing your PF balance.
EPF Joint Declaration Form: Online Changes to EPF Account
The Joint Declaration Form is used to make changes to EPF Account details online. You can use it to update your account information if your PF withdrawal application is rejected due to mismatched information.
The PF Joint Declaration Form allows you to change a total of 11 parameters. The list contains your name, date of birth, father’s and mother’s names, gender, marital status, relationship status, nationality, aadhar card number (Unique Identification Number (UID), office joining date, leaving date, and reason for leaving.
This form can be found under the Services section of the EPFO website. Under the Services section, select the option for employees. Before using this form to make changes, you must first log into the EPFO portal with your UAN credentials. Additionally, you must upload any supporting documents related to the changes you are making.
Changes can only be made to EPFO accounts created by the dedicated present employer.
Conclusion of PF withdrawal for House Buying
To summarise, the PF withdrawal to buy a home is an excellent way to fund your property purchase. However, it is recommended that you only consider using your Provident Fund for housing purposes after careful consideration. Only in extreme circumstances should this fund be considered to finance your home.
Latest Updates on PF Withdrawal for Home Purchase
EPFO Introduces New PF Withdrawal for Home Purchase Rules for Quick Settlements.
May 15, 2024: The Employees’ Provident Fund Organisation has issued new rules for settling employee PF claims. These rules govern claims involving medical conditions, marriage, education, and housing.
The authorised EPFO officials have revealed that with these new rules in place, EPF claims will be automatically approved, providing applicants with a simple, quick, and hassle-free claim settlement. According to the officials, Rule 68B of the rulebook allows employees to withdraw their Provident Fund funds to build or purchase a home. The rule also addresses the amount of PF that can be withdrawn for home improvements or modifications.
Typically, it takes time for the EPFO to approve and process PF claims. However, the new rules will reduce human intervention throughout the process. The IT tools will automatically process claims raised by employees after they have completed the KYC process. The claim settlement time in such cases will be reduced from 10 days to 3-4 days.
