PF Partial withdrawal rules - House purchase, renovation & home loan.

Hello Everyone, in this post we will discuss on PF Partial Withdrawal rules specifically for house purchase, renovation and repayment of home loan.

Some of the topics we will cover in this post are:

What is EPF Partial withdrawal?

Employees’ Provident Fund Organisation (EPFO) enables the users to partially withdraw or take advance from their PF amount in certain scenarios.

Some of the common situations are; the purchase or construction of a house, repayment of the loan, non-receipt of salary for 2 months, for the marriage of self/daughter/son/brother, for medical treatment of self or family member, etc.

There are variations in the limit on the amount which can be withdrawn and they need to meet specific criteria to be eligible for the withdrawal. You can also apply online through EPFO’s member’s portal for partial withdrawal.

The computation of PF partial withdrawal is based on your monthly salary or contributions made till time.

Salary definition for the EPF calculation

Salary = Basic + Dearness Allowance. Thus the salary here is not your take-home salary. Therefore, the ‘no.of years of service’ is the total no.of years the employee has worked to EPF. It can be under single or multiple employers.

It is not mandatory to refund the withdrawal amount under normal condition. However, if you did not utilize this amount, it should be refunded with penal interest.

The Purchase of Plot/ House/Flat and Construction of House

As per the PF scheme, an employee can withdraw money from his / her PF after 3 years of contribution to the purchase of plot/house/ flat.

An employee can withdraw up to 90% of EPF Balance (Employee share and interest on that + Employer share and interest on that) or the cost of the construction of property whichever is less.

The plot where construction happens can be owned by the employee or employee spouse, or jointly by both. The amount depends on the purpose for which the loan is taken.

Different purposes for PF withdrawal under housing

  • For purchasing a plot, the maximum withdrawal amount is 24 months’ basic salary and dearness allowance (DA). This is subject to a maximum of the lower of either the balance in PF account or the cost of the plot.
  • If a loan is taken to purchase or construct a house then it is 36 months of basic salary and DA, with the maximum again subject to lower of balance in the PF account or cost of the house.
  • Note: you can not claim the withdrawal of PF if purchase property jointly with anybody else, except with spouse.
  • Note: If the plot is being bought from a builder directly, then the minimum PF membership is considered as 5 years.

Important points to note:

In case of withdrawal, the construction should start within 6 months and completed within 12 months of the withdrawal.

In case if the amount is to buy a ready house, the purchase should be completed within 6 months.

The withdrawals for purchase or construction can be also made in one or more instalments, depending on the conditions.

The EPF balance must be more than Rs.20,000 and if the spouse is also the EPF member, then the combined balance will be considered for the eligibility.

If the amount of such withdrawal is more than the actual cost of obtaining the property, then the excess amount has to be returned to EPFO in parts within 30 days from the date of allotment or completion of project or alteration of house, etc.

In case, the EPF advance amount is not utilized, the complete amount has to be returned to the EFPO account within 15 days.

Purchase of House / Flat, Construction of House and acquisition of Site
Sl. No Purpose of Withdrawal Years of Service Eligible Amount No. of Withdrawals Any declaration required?
1 Purchase of Land 3 years
w.e.f April 2017
90% of EPF Balance
or
total cost,
whichever is less
Once in working life Not Required
2 Purchase of House/Flat
3 Construction of House

Renovation of the house

The employee can withdraw from their PF account, for making additions or improvements to a residential house that is owned by self or spouse or jointly.

This withdrawal can only be availed, after 5 years from completion of the house. It can be availed, even if the withdrawal facility for purchase or construction of the house is not availed.

Therefore, the amount eligible to withdraw, for renovation, is 12 months’ basic salary and DA, subject to lower of the balance relatable to the employee’s share with interest in PF account or the cost of such improvement.

The employee can also avail of the withdrawal facility again, only after 10 years from the first withdrawal, subject to the same eligibility criteria, vis-à-vis the amount.

Repair/Renovation of house
Sl. No Purpose of Withdrawal Years of Service Eligible Amount No. of Withdrawals Any declaration required?
1 Repair/Renovation of the house 5 years
from completion of
house construction
12 months basic salary and DA
or
Employee’s share with interest
or
Total cost,
whichever is less
Once in working life Not Required

Repayment of Home Loan

An employee can prepay the home loan by withdrawing the PF amount.

For the withdrawal, the employee should have reached at least 10 years of service. The withdrawal is done through the From 31 (form for EPF partial withdrawal).

The withdrawal amount sanctioned for this reason:

  • 36 times of monthly salary (or)
  • Total contribution (or)
  • The total outstanding home loan amount
Repayment of Home Loan
Sl. No Purpose of Withdrawal Years of Service Eligible Amount No. of Withdrawals Any declaration required?
1 Repayment of outstanding Home Loan 10 years 36 months basic salary and DA
or
Total of Employer & Employee’s share with interest
or
Total outstanding principal & interest,
whichever is less
Once in working life Certificate from bank mentioning outstanding principal & interest

Here we come to an end of the post on EPF partial withdrawal rules for house purchase, renovation and repayment of home loan. Let us know about your views and opinions in the comments below.