PF Withdrawal – A Simple Way To Fund Your New Home
PF Withdrawal Fund Your New Home : Have you considered using a PF withdrawal to finance your new home? That is, indeed, a convenient and simple option. Continue reading to find out more.
When it comes to purchasing a new home, one of the most important considerations is financial planning. While some home buyers use their own money or savings, others take out a home loan to purchase their dream home. However, there is one intriguing but underutilised method of financing your home. It is accomplished through the use of provident fund funds or PF withdrawal.
For the uninitiated, EPF stands for Employee Provident Fund, also known as Provident Fund (PF). When a homebuyer is unable to finance a home, the money saved in Provident Fund can be a lifesaver. According to the PF withdrawal rules, provident fund withdrawal or PF withdrawal is permitted in cases of home purchase or construction, or to repay a home loan used to finance a home purchase. (Online PF Withdrawal)
Let us delve a little deeper into the subject.
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What is the definition of a Provident Fund account?
The Provident Fund is a government-managed retirement plan for salaried workers. Under the Provident Fund system, both the employer and the employee contribute to the employee’s PF account. Both the employer and the employee contribute in equal amounts. The contribution to the provident fund is 12% of the basic salary and dearness allowance. (Online PF Withdrawal)
The primary goal of the Provident Fund (PF) is to provide a lump sum payment to the employee upon retirement. However, this accumulated wealth can be withdrawn prematurely, as in the case of home purchase or construction, land purchase, and home loan repayment. (Online PF Withdrawal)
What are the eligibility requirements for a PF withdrawal for a home purchase?
The provident fund system was created primarily to provide a solid retirement corpus for salaried employees. The accumulated sum, on the other hand, can be withdrawn for home purchases. If you want to check your EPFO balance, go to UAN login and look at your EPFO member passbook.
An employee is eligible for PF Withdrawal under the newly introduced provision number 68BD in the ‘Employees Provident Fund Scheme’ 1952 for the purpose of purchasing a home, plot, and building a house. (Online PF Withdrawal)
PF Withdrawal for Plot Purchase- If a salaried person wishes to take a PF Withdrawal for the purchase of a plot for house construction, the PF Withdrawal will be 24 months of the employee’s Basic Salary plus Dearness Allowance (DA), or the cost of the plot, whichever is less.
If the person wants to go for PF Withdrawal for Buying a Ready to Move In 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 lower.
PF Withdrawal for Home Repairing or Renovation- If a person wishes to use his PF withdrawal for home improvement or renovation, he will be able to withdraw 12 months of basic salary and Dearness Allowance (DA), or the cost of repairing work, whichever is less. (Online PF Withdrawal)
However, there are some restrictions regarding the PF Withdrawal for house construction.
Other Causes of PF Withdrawal
- Aside from home purchase or renovation, PF withdrawal can be made in the following circumstances:
- A person has reached the retirement age.
- A female employee is resigning due to marriage, pregnancy, or other personal reasons.
- If a person moves to another country
- If a person has been out of work for more than 60 days or two months, he or she is eligible for unemployment benefits.
Conditions for Withdrawal of PF for House Construction
- Although the Provident Fund is an excellent option for financing a home purchase, the PF withdrawal is subject to a number of conditions. The following are the most common conditions for a PF withdrawal for a home purchase.
- Whether the PF withdrawal is for a land purchase or ready-to-move property, or for repairing and renovating an existing property, the PF withdrawal will be limited to 90 percent of the EPF balance.
- Persons with a minimum of five years of service are eligible for PF withdrawal.
- If the PF withdrawal is made before the five-year period from the date of account opening, it is taxable under the law. This withdrawal will be taxed under the ‘Income from Other Sources’ heading. TDS at the rate of 10% will be levied on the amount withdrawn.
- It should be noted that the PF withdrawal for joint purchase does not apply to anyone other than your spouse.
- The newly built house must be owned by the employee or their spouse, or jointly by both people.
House Building by a Cooperative Society/Housing Society Member
In addition to the aforementioned benefits, the EPFO allows a member of a registered society or a housing society to withdraw PF funds for housing construction or plot purchase. Let us look at the specifics.
According to Section 68BC of the EPF scheme, a member of a registered society or a housing society (with a minimum of ten members) will be eligible to withdraw the Provident Fund balance for a 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. This facility, however, is subject to a condition. In such cases, the PF withdrawal will be the lesser of 90 percent of the Provident Fund balance and the actual cost of the property purchased. (Online PF Withdrawal)
In addition to this provision, there is one more important condition associated with this type of PF withdrawal online.
The employee must have served for at least five years and contributed to his PF fund. Furthermore, the share of contribution with interest in the PF balance, together with the spouse who is also a member, cannot be less than Rs 20,000. In this case, this is critical for the PF withdrawal.
PF Withdrawal for Home Loan Repayment
In addition to the aforementioned benefits, the PF withdrawal or balance can 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 pay off the member’s or his/her spouse’s outstanding loan.
Such withdrawals, however, will be limited to the equivalent of 36 months of basic salary and Dearness Allowances (DA). Furthermore, the employee must have completed at least ten years of service to be eligible for this option. (Online PF Withdrawal)
Furthermore, the home loans obtained in this case had to be obtained from registered financial institutions with the
- State administration
- Institutions of Public Finance
- Non-banking Housing Finance Corporations
- State Housing Authorities
- Municipal Governments
PF Withdrawal Fund Your New Home : Offline PF Withdrawal
Offline PF withdrawal is possible by submitting a Composite Claim Form to the EPFO office. The Composite Claim Form is available at the nearest EPFO office and comes in two varieties: Aadhar and Non-Aadhaar. (Offline PF Withdrawal)
Composite Claim Form (Aadhar Form): When an Aadhar card and bank account are linked to a UAN account, the Aadhar form is used. In this case, no attestation from the employer is required.
Composite Claim Form (Non-Aadhar Form): This form is used if Aadhar and bank details are not linked to a UAN account. You must have it attested by your employer.
Once completed, the form should be submitted to the EPFO office. If you cannot recall or have misplaced your UAN number, the same procedure will be followed.
How do I apply for a PF withdrawal for a home purchase online?
A person can easily apply for a PF withdrawal for housing purposes online. To apply for a PF withdrawal online, follow the steps outlined above.
- Step 1: Visit the EPFO website and link your Aadhar number to your Universal Account Number (UAN).
- Complete the online PF withdrawal form.
- Provide your personal and bank account information.
- Following departmental approval, the funds will be credited to your account within 15 working days. (Online PF Withdrawal)
What documents are required for PF withdrawal?
- When an EPFO member wishes to withdraw his or her PF, the following documents must be presented to the EPFO member.
- The most important requirement is a Universal Account Number, or UAN. The UAN can be found on the EPFO member passbook or obtaine from the employer.
- EPFO member’s bank account information (similar to a passbook). Both the EPFO member account and the bank account must have the same name.
- Money cannot be transferre to a third party while the EPFO member is alive, so the bank account must be in the EPFO member’s name.
- The EPFO member’s personal information must be the same in both the identity proof and the EPFO member account.
The Tax Effects of a PF Withdrawal for Housing Construction
The use of a PF withdrawal for housing has tax implications. When an employee withdraws a lump sum for home construction, the amount is exempt under section 10 (12) of the Income Tax Act of 1961. It is conditional on the employee having completed five years of continuous service.
How many times can an employee withdraw PF funds for house construction?
EPF subscribers can withdraw funds from their accounts to help with the financial burden of purchasing a home. However, this service is only available once in a lifetime.
Should I withdraw my PF funds for home construction?
Even if the option of PF withdrawal is available to employees, experts advise against it. The primary goal of the Provident Fund scheme was to provide a supplemental sum at the time of retirement. This fund will be of great assistance to you during your retirement years. While you are still working, taking out a home loan and repaying it is preferable to withdrawing your PF balance.
To summarise, the PF withdrawal to buy a home is a fantastic way to fund your property purchase. However, it is recommended that you use your Provident Fund for housing only after careful consideration. Only in extreme cases should you consider using this fund to finance your home.
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