Employee Provident Fund, or EPF, is a retirement benefits scheme approved by the Indian government for salaried employees. Under this scheme, a small sum of money is contributed by employees as well as employers to their PF(Provident Fund) accounts.
You can withdraw a sum of money from your PF account and use it as a personal loan. However, it is not a typical personal loan where you need to repay the amount to the bank. A PF loan is non-refundable.
The Employees’ Provident Fund Organisation EPFO oversees this procedure and allows an employee to withdraw money only after the reason is verified and justified. Usually, if you have been in service for 5 years or more, a loan will be sanctioned from your PF account.
The total amount lying in inoperative EPF accounts has surged over fivefold to ₹8,505 crore in FY24, up from ₹1,638 crore in FY19, according to the government. Despite being inactive, all such accounts have identifiable claimants, and the EPFO settles claims upon verification.
As reported by The Hindu on November 25, 2024
There are two ways through which you can apply for a PF loan. They are as follows:
Submit a physical application
Submit an online application
Here is the step-by-step process to submit a physical application for a PF loan -
Step 1: Download the composite claim form (Aadhaar) or the composite claim form (non-Aadhaar) from the EPFO site
Step 2: If you take the composite claim form (Aadhaar), you will have to fill it and submit it to the respective EPFO office. You can submit the same without getting it attested by your employer.
Step 3: If you take the composite claim form (non-Aadhaar), then you will have to fill it and submit it after getting it attested by your employer.
Step 4: If you wish to withdraw only a certain sum from your PF account, you don't have to submit various certificates as the requirement has been removed. You can select the option to submit self-certification.
Before you submit an online application to avail of a PF loan, you must meet the following requirements before submitting an online application for a PF loan -
Ensure that your Universal Account Number or UAN is activated.
Ensure that the mobile number which you have used for activating your UAN is still active.
Ensure that your UAN is linked to your KYC (Aadhaar, PAN, and bank details).
Once you meet the above requirements, you won’t need the attestation from your previous employer.
Here is the step-by-step process to submit an online PF application -
Step 1: Log in to the UAN portal by putting your UAN and password.
Step 2: Click on ‘Manage’ → ‘KYC’, to ensure that your KYC details are correct.
Step 3: Once your details are verified, click on ‘Online Services’ → ‘Claim (Form-31, 19 & 10C)’.
Step 4: Your details will be displayed. Enter the last four digits of your bank account and click on ‘Verify.’
Step 5: Select ‘Yes’ on the pop-up window to proceed.
Step 6: Click on ‘Proceed for Online claim.’
Step 7: Now, select the type of claim you want (full EPF settlement, EPF part withdrawal (loan/advance), or pension withdrawal) under the option ‘I Want To Apply For.’ If you are not eligible for PF withdrawal or pension withdrawal, then you will not see the option in the menu.
Step 8: Click on ‘PF Advance (Form 31)’ and fill in the details.
Step 9: Submit your form after clicking on the certificate. Once your employer approves your withdrawal request, the amount will be credited to your bank account within 15 to 20 days.
The following are the documents that are required for a PF loan:
Form 19: This document is needed for the final PF settlement
Form 10-C: This is required if you wish to avail of pension withdrawal benefit.
Form 31: This is required to withdraw a partial sum of money from your PF account
Though PF loans do not have an interest rate, you will have to pay a specific cost. This cost is calculated in terms of the amount that would have accumulated as interest on the withdrawn amount had you not taken it out. The interest which is calculated on EPF deposits is 8.5%. This rate is based on the monthly running balance.
Here is a table that describes mandatory service tenure limits, maximum withdrawal caps, and purpose restrictions related to PF loans -
|
Purpose of EPF Advance |
Minimum Service Tenure Required |
Maximum Withdrawal Limit Allowed |
Maximum Frequency Allowed |
|---|---|---|---|
|
Medical Treatment (Self, Spouse, Children, Parents) |
0 Years (No minimum service) |
Up to 6 months basic salary + DA (or full employee contribution) |
No limit (As per medical need) |
|
Marriage (Self, Children, Siblings) |
7 Years |
Up to 50% of total employee contribution |
Maximum 3 times |
|
Higher Education (Post-Matriculation for Children) |
7 Years |
Up to 50% of total employee contribution |
Maximum 3 times |
|
Purchase of House Plot |
5 Years |
Up to 24 times monthly basic salary + DA |
Only 1 time |
|
Construction / Purchase of House |
5 Years |
Up to 36 times monthly basic salary + DA (or up to 90% of total balance) |
Only 1 time |
|
Home Renovation / Alterations |
5 Years |
Up to 12 times monthly basic salary + DA |
Only 1 time |
|
Home Loan Repayment |
10 Years |
Up to 90% of accumulated employee and employer contribution |
Only 1 time |
|
Company Lockout / Salary Delay (15+ days shutdown) |
0 Years |
Equal to unpaid wages (or employee share if closed 6+ months) |
No limit |
|
Unemployment |
1 Month (75% balance) 2 Months (100% balance) |
75% of total balance after 1 month; remaining 25% for full settlement after 60 days |
Only 1 time per unemployment period |
|
Natural Calamities / Pandemic |
0 Years |
Up to 3 months basic salary + DA or 75% of EPF balance |
As notified by EPFO |
Let’s understand the tax rules under SEction 192A of the Income Tax Act -
EPF withdrawals made after completing 5 years of continuous service (including service transferred across multiple employers) are completely tax-free.
If your total continuous service is less than 5 years and the withdrawal amount exceeds ₹50,000, Tax Deducted at Source (TDS) applies:
No TDS is deducted if the withdrawal is caused by ill-health, company closure/lockout, or discontinuation of the employer's business.
To check the status of your EPF Advance claim, follow the steps below -
Step 1: Open the EPFO website.
Step 2: Select ‘Services’ and click ‘For Employees.’
Step 3: You will now be redirected to a new window. In this window, select ‘Services’ → ‘Know Your Claim Status’.
Step 4: Now log in by entering your UAN and password. You must also provide your PF account number, the state name where your PF office is located, and the establishment code.
Step 5: Once done, you can check the status of your claim easily.
An EPF advance comes in handy in times of emergencies like illness, family weddings, or house construction. However, early withdrawals reduce your tax-free retirement compounding. Thus, it is suggested that you evaluate your overall financial options so that your long-term security is protected.
You can also consider a personal loan instead of disturbing your long-term EPF retirement corpus. Download the Moneyview App or visit the website to apply for a personal loan up to ₹10 Lakh.
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The starting interest rate depends on factors such as credit history, financial obligations, specific lender's criteria and Terms and conditions. Moneyview is a digital lending platform; all loans are evaluated and disbursed by our lending partners, who are registered as Non-Banking Financial Companies or Banks with the Reserve Bank of India.
This article is for informational purposes only and does not constitute financial or legal advice. Always consult with your financial advisor for specific guidance.
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