alexa
Indianmoney.com Missed Call Number
Home Articles How To Get A Loan From EPF Account

How To Get A Loan From EPF Account

IndianMoney.com Research Team | Updated On Saturday, July 07,2018, 04:13 PM

4.3 / 5 based on 48 User Reviews

How To Get A Loan From EPF Account

 

 

 

You work for a reputed Company and earn a handsome salary. But, is your entire salary yours? No, if you are a salaried employee, you have to compulsorily invest a part of your salary in the employee provident fund, popularly called EPF.

An amount of 12% of your basic salary, is compulsorily deducted by your employer. This amount is deposited in an account in your name, called the employee provident fund. Your employer makes an equal contribution (contributes the same amount as you have contributed), to this account. This account is maintained by the EPFO and interest is paid on it. You get this money when you retire, to enjoy a happy retirement.

But, what if you need money for something really important in life, Right Now? What if you need money for your marriage? What if you need money to buy a plot of land which could give great returns in a few years? What if you need money to repay your home loan? There’s some good news. You can take a loan from your EPF account and you don’t need to return it.

Want to know more on loans and retirement planning? Just leave a missed call on IndianMoney.com financial education helpline 02261816111 or just post a request on IndianMoney.com website. IndianMoney.com offers Free, Unbiased and on-call financial advice on Insurance, Mutual Funds, Real Estate, Loans, Bank Accounts and capital markets.

 

You May Also Watch: 

 

 

1. How to get a loan from EPF account?

 

Strictly speaking this is not a loan. It’s an advance which you can avail only in specific situations. You can get this advance even when you are still working (in a job with your current employer). The amount you can get as an advance, depends on the specific situation you need the money and also the number of years, you are in service.You have to submit Form 31 called the EPF advance form, through your employer to the EPFO, along with relevant documents. If you need the advance for your marriage, you need to submit the marriage invitation card along with the application.In the EPF Form 31, you will have to give PF account number, salary and bank account details. Your claim is then processed and money is directly credited to your bank account.

 

2. When can you avail a loan against EPF?

 

You can avail a loan against EPF based on the number of years of service. You have to submit an EFP advance form, Form 31, through your employer to the EPFO, along with the relevant documents.

In the EPF Form 31, you will have to give your EPF account number, salary and bank account details. Your claim is then processed and money is directly credited to your bank account.

Note the situations in which you can get a loan:

 

  • Marriage:

 

You can take a loan against EPF for marriage expenses of self/brother/sister/daughter/son. The maximum amount you get is 50% of your (employee) share + interest, at the time of presenting your application.

You have a maximum of only 3 withdrawals in your whole life. Your membership period must be 7 years. You might need to show the marriage invitation card.

 

  • Education:

 

You can take a loan against EPF for education fees of self/brother/sister/daughter/son. The maximum amount you get is 50% of your (employee) share + interest, at the time of presenting your application.

You have a maximum of only 3 withdrawals in your whole life. Your membership period must be 7 years. You might need to show a certificate regarding course of study and estimated course fees.

 

  • Medical expenses:

 

A loan against EPF can be withdrawn for medical treatment for self, spouse, son, daughter, dependent father or mother. The maximum amount you get is 6 months basic salary + dearness allowance or your (employee) share with interest, whichever is less.

You have a maximum of only 1 withdrawal in your whole life. You can get this loan anytime. You may need a doctor’s certificate.

 

  • Repayment of home loan:

 

You can take a loan against EPF to repay your outstanding home loan from a Nationalized bank or a registered co-operative society. The amount of loan that you can get is 36 months basic salary + dearness allowance or the total of your (employee) share and employer’s contribution to EPF with interest or total outstanding principal + interest, whichever is least.

You have a maximum of only 1 withdrawal in your whole life. Your membership period must be 10 years. You might need a certificate from the bank/lender showing outstanding principal + interest.

 

  • Purchase of a home or plot of land:

 

You can take a loan against EPF to buy a house or a plot of land. The amount of loan you can get is 36 months basic salary + dearness allowance or the total of your (employee) share and employer’s contribution to EPF with interest or the total cost of purchase of the house/plot, whichever is least.

You have a maximum of only 1 withdrawal in your whole life. Your membership period must be 5 years. You have to take a loan against EPF only as a last resort. It’s the money you need for retirement.

 

  • Company lockout:

 

If your company is locked out or doesn’t pay you wages for at least two months or closed for at least 15 days, you can avail a loan against EPF. The amount of loan in this case will be equal to your unpaid wages. (provided your EPF account has balance in the employee contribution). If you company has been locked out for more than 6 months, you can utilize the employer’s contribution as well.

 

SEE ALSO: 5 Drawbacks of Following Investment Strategies of Celebrity Equity Investors

 

  • Renovation of house:

 

The maximum amount you get is 12 times your wages. The said property should be more than 5 years old and must be owned by you or jointly owned with your spouse.

 

  • Calamity:

Natural calamity can incur huge loss. In such cases, you can withdraw from provident fund. There is no condition of minimum years of completion of service. You will have to furnish certificates of damage from the relevant authority. The amount of loan that you can get is 50% of the employee share.

 

3. Rules for withdrawal of EPF amount before retirement:

 

An EPF account matures when you turn 58 years. However, you can withdraw before your EPF account matures. Withdrawal from EPF comes with certain conditions, as follows:

1. If you want to withdraw within 5 years:

  • TDS @ 10% is charged on your withdrawal if your PAN is registered.
  • In all other cases, funds are taxed at 30%.

 

2. If you want to withdraw after 5 years:

  • No tax is charged.

 

3. Loss of job:

  • You can withdraw 75% of the accumulated corpus after being unemployed for a month.
  • You can withdraw 25% of the accumulated corpus and go for final settlement after being unemployed for two months.

For more information about EPF visit EPF website: https://epfindia.gov.in/site_en/index.php.

 

Be Wise, Get Rich

 

Did you find this article useful? You can Rate us
4.3 / 5 based on 48 User Reviews
Article Author

IndianMoney.com Research Team

The research team at IndianMoney.com comprises of certified and experienced professionals who share the company's vision to make every Indian financially literate by equipping every Indian with right and unbiased advice. IndianMoney.com research team provides newsletters, articles, videos and FAQs on various financial products and concepts only to help you make wise financial decisions.

Get It now!