Imagine wanting to purchase a beautiful house or an amazing car but not having the finances to do so. Sometimes needs and wants don’t always sync with the finances required for the same. In such cases availing of a loan is the best possible solution. Home loans, auto loans, education loans, or even personal loans, there is a multitude of loans available for various requirements. Most banks and Non-Banking Financial Institutions (NBFCs) provide different types of loans with varied repayment terms and interest rates depending on the type of loan availed. However, most of these loans also require collateral and they have certain eligibility criteria that need to be met.
But what if there is another way to procure financial help without having to repay it back? The solution being talked about is to avail a loan against the Employees’ Provident Fund (EPF).
Generally, one needs to have retired from service in order to access the amount in the EPF account. However, there are certain exceptional situations wherein the amount can be withdrawn earlier. This is sometimes known as EPF loan or EPF personal loan. This is, however, an inaccurate description as unlike other loans, this amount does not have to be repaid. The EPF loan eligibility varies depending on the reason for which the EPF corpus is being withdrawn.
The situations in which an individual can withdraw the amount earlier are as follows –
However, it is to be noted that there are certain other criteria that will have to be met as well in order to be eligible to partially withdraw EPF corpus, as illustrated in the table below.
| Reason for Withdrawal | Withdrawal Limit | Number of years in Service | Maximum frequency of Withdrawal |
|---|---|---|---|
| Marriage | Up to 50% of employee’s share | Minimum 7 years | 3 times |
| Education | Up to 50% of accumulated funds | Minimum 7 years | 3 times |
| Medical Treatment | 6 times the monthly wage of employee and dearness allowance | N/A | No limit |
| Purchase of home/plot |
For a plot: Up to 24 times the monthly wage and dearness allowance of the employee For home: Up to 36 times the monthly wage and dearness allowance of the employee |
5 years | only once |
| Home Renovation | 12 times employee’s wage | 5 years | Only once |
| Home Loan Repayment | Up to 90% of the employee and employer’s contribution | 10 years | Only once |
| Lockout | Withdrawal amount is equal to the unpaid wages | N/A | No limit |
| Natural Calamity | Up to 50% of the employee’s share in EPF | N/A | No limit |
| Withdrawal prior to Retirement | Up to 90% of the accumulated balance in the fund + the interest | At the age of 57 years or above | Only once |
While EPF contributions are tax exempted and deductions can be claimed, availing partial withdrawal of EPF corpus prior to completing 5 years of employment is taxable if the amount that is withdrawn is over Rs.50,000. The tax deducted at source or TDS will be at the rate of 10%. In case the individual does not have a PAN card, the TDS will be at the rate of 34.6%. This will however not be applicable if the said individual wishes to partially withdraw EPF due to lockout or a medical condition.
Assuming that an individual meets the EPF loan eligibility as mentioned above, he/she can apply for the withdrawal either online or offline. There are certain documents that are needed prior to applying for the same.
There are a few basic documents that are necessary while applying for the withdrawal of EPF corpus. These are –
Applying for an EPF loan online is quite easy. The steps given below will have to be followed -
After the EPF loan has been approved, it will be credited directly to the individual’s bank account within 15 to 20 days.
In case individuals cannot apply for an EPF loan online, then the same can be done offline as well. The following steps will have to be followed for the same –
The current situation that the world is going through in light of the COVID pandemic is unique. With thousands having lost their jobs, individuals are looking to build savings or pay their bills. Currently, the EPFO has allowed subscribers to avail a non-refundable advance of up to 3 months of basic wages as well as a dearness allowance OR 75% of the balance in the EPF account, whichever is less. Individuals can access further details regarding this on the EPFO website.
Contributing to an EPF is compulsory for those employed within an establishment that has a workforce of more than 20 individuals and where the base salary is Rs. 15,000 and above. However, this is done so that employees have a retirement corpus to look forward to. While being able to withdraw from an EPF account is definitely an advantage and can always help, one must ensure that the amount is withdrawn only after careful consideration as having a sum kept aside for post-retirement is also important.
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