What is a PF Loan?

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 from eligible organizations from their monthly basic pay in their PF(Provident Fund) accounts.

Employees can withdraw a sum of money from their PF accounts and make use of the withdrawn money as a personal loan. While the name may signify that it is a loan, it is not like the typical personal loan where the person needs to repay the amount to the bank. In a PF loan, the repayment procedure is not included, as it is non-refundable.

The Employer’s Provident Fund Organization or EPFO oversees this procedure and allows an employee to withdraw money only after the reason is verified and justified. Usually, an employee who is in service for 5 years or above is sanctioned a loan from his/her PF account. This condition can change according to the reason for applying for a PF loan.

How to Apply for a PF loan?

There are two ways through which you can apply for a PF loan. They are as follows:

  • You can submit a physical application
  • You can submit an online application

Submit a Physical Application for PF Loan:

  1. Download the composite claim form (Aadhar) or the composite claim form (non-Aadhaar) from the EPFO site
  2. If you take the composite claim form (Aadhar), you will have to fill it and submit it to the respective EPFO office. You can submit the same without getting it attesting by your employer.
  3. If you take the composite claim form (non-Aadhar), then you will have to fill it and submit it after getting it attested by your employer.
  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. To know more, click here.

Submit an Online Application for PF Loan:

Before you submit an online application to avail of a PF loan, you must meet the following requirements:

  1. Make sure that your Universal Account Number or UAN is activated. Also, ensure that the mobile number which you have used for activating your UAN is still active.
  2. Do not forget to link your UAN with your KYC (Aadhaar, PAN, and bank details).

Once you meet the above requirements, you won’t need the attestation from your previous employer.

You can follow the steps below to submit an online application:

  • Open the UAN portal and log in by putting your UAN and password.
  • Click on Manage > KYC. Follow this step to ensure that your KYC details are correct.
  • Once your details are verified, click on Online Services > Claim (Form-31, 19 & 10C)
  • Your details will now be displayed. You must now enter the last four digits of your bank account and then click on ‘Verify.’
  • Select ‘Yes’ on the pop-up window to proceed.
  • Click on ‘Proceed for Online claim.’
  • 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.
  • Click on ‘PF Advance (Form 31)’ and fill in the details.
  • 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.

Documents that are required for a PF Loan Application

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

Rate of Interest:

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 which would have accumulated as an interest rate 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.

Reasons to Take a PF Loan:

As mentioned above, the EPFO will approve of a loan from your PF account only when your reason to apply for it is justified. This process ensures that employees do not take advantage of a PF loan and withdraw small amounts frequently. Saving in a PF account leads to the financial stability of an employee even after retirement. And so, frequent withdrawal of cash is not encouraged while the employee is still in service. If you wish to apply for a PF loan, then you can check out some of the reasons below for which such a loan is usually approved:

Marriage: In India, a wedding is not usually a one-day event. It spans for days. Therefore, a hefty amount of money is spent on the festivities. So, if you want to withdraw money for this reason, then the following are some of the conditions which should be met:

  • You can withdraw 50% from your PF account.
  • You can withdraw money for the marriage of your children or siblings.
  • You must be in service for a minimum of 7 years.
  • You can withdraw up to 3 times.

Illness: To withdraw money for medical purposes, the following are the conditions that you must adhere to:

  • Unlike weddings, to take a PF loan for any medical treatment, you do not need to be in service for a specified time
  • You can withdraw the entire amount in your PF account or six months of DA and basic salary.
  • You can take this loan for yourself, your parents, and your spouse.

Renovation or Construction of a House: To own a house is a dream for many people. If you want to renovate your old house or construct a new one, then you can take a PF loan. Check the conditions required

  • You must complete a minimum of 5 years of service.
  • The property you wish to renovate or construct must be in your name or your spouse’s name. It can also be jointly owned by you and your spouse.
  • You can withdraw the amount just once.
  • You can withdraw your entire contribution or 36 times the basic salary and DA.

Education: If your child has bagged a seat in a university or college, then you can withdraw money from your PF account to contribute to the cause. Check the conditions below if you wish to take a loan for education purposes

  • You can withdraw only 50% from your PF account.
  • You can withdraw up to 3 times.
  • PF loan is sanctioned for only post-matriculation education of your children.
  • A service period of 7 years is mandatory.

To Buy Land: If you wish to buy a piece of land, then you can withdraw money as a PF loan from your PF account. You can check the conditions below to know more

  • A service period of 5 years is mandatory.
  • The property must be in your name or your spouse’s name. The property can also be jointly owned by both of you.
  • You can take out the money only one time
  • You can withdraw your entire contribution or 24 times your basic salary and DA

Lock-out of the Company: If any employee stops receiving his/her salary in the event of a lock-out, then he/she can withdraw money from his/her PF account after meeting the following conditions:

  • If a company has been shut down for 15 days and above or has stopped giving salary to the employees for two months or more, then the employees can take PF loans.
  • You can withdraw only your share or an amount that is equivalent to your unpaid salary.
  • If the company is shut for more than six months, then you can withdraw your employer’s share too

Unemployment: Those who are unemployed for a month can withdraw up to 75% from their PF accounts. If one is unemployed for 2 months and above, then he/she can withdraw the entire contribution from his/her PF account.

Apart from the above, one can also apply for a PF loan in the event of a natural calamity.

Advance Sanctioned for Covid-19

The coronavirus pandemic has wreaked havoc across the world and has led to the loss of millions of lives. With lockdowns enforced, many people have also lost their sources of income. To help affected employees in such turbulent times, a special provision has been added in the EPF Act by the EPFO. Under this provision, an affected person can withdraw a non-refundable COVID-19 emergency advance from his/her PF account.

Check the Eligibility Criteria Below:

  • Employees who work in a factory or organization that is located in a government-declared containment zone and who have been affected by the outbreak are eligible.
  • As the pandemic has spread across the country, all employees can take the EPF Advance.
  • You do not have to submit any document to get this Advance.
  • You can withdraw up to three months of your wages and DA. You can choose to withdraw 75% of your contribution from your PF account.
  • No repayment is required.

If you wish to avail of the EPF COVID-19 Emergency Advance then you must fill the online claim form. Make sure that your UAN is validated with your Aadhar card and the KYC of your bank account. You must also link your mobile number to your UAN to ensure the completion of the withdrawal process.

You can even use the Unified Mobile Application for New-age Governance or the UMANG app to avail of the COVID- 19 Emergency Advance.

Know-How to Calculate Your Loan

It is easy to calculate the loan amount which will be sanctioned to you. We will explain with an example. Let’s say Miss Kavita has applied for a COVID-19 Emergency Advance loan. She has a balance of INR 2.5 lakhs in her PF account. Now, the sum of her monthly basic wage and DA is 25000. So, the total amount for three months would be 75000. If we calculate 75% of INR 2.5 lakh, it will be INR 187500

Now since the sum of Miss Kavita’s DA and basic wage is less than 75% of her PF account balance, she will be able to withdraw INR 75000 as her COVID-19 Emergency Advance loan.

Check the status of your loan

To check the status of your EPF Advance claim, follow the steps below:

  • Open the EPFO website.
  • Select ‘Services’ and click ‘For Employees.’
  • You will now be redirected to a new window. In this window, select Services > Know your claim status.
  • 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.
  • Once done, you can check the status of your claim easily.

PF Loan - Frequently Asked Questions (FAQs)

  1. Is it mandatory to contribute to your PF account?
    Yes, you must contribute to your PF if you receive a salary of INR 15000 or more and you work at an organization where the workforce is over 20. If your organization’s workforce is less than 20, they can opt to get enrolled in EPF.
  2. Is it necessary for an employee to submit the online form generated for a claim to the employer?
    No, employees are not required to submit the forms to their employers.
  3. Will tax be deducted if I withdraw money from my PF account?
    No, the tax will not be deducted if you have been in service for five years consistently. If you have not worked continuously for five years, then tax will be deducted on the amount which is provided by the employer to the EPF.
  4. Can I check my EPF account statement online?
    Yes, you can check it online by visiting the official EPFO portal. However, you can access this feature only if you are still contributing to your PF account.