funds accumulated in an employee’s EPF account build a retirement corpus for the employee as a reward for his/her hard work and dedication for the job. 12% of the employee’s dearness allowance and basic salary is contributed to the EPF, every month. This contribution is made in equal ratio (12% each) by the employer and the employee, both. Additionally, employees also get a PF loan interest rate at 8.5% on the accumulated corpus.
While the employees can withdraw this amount only upon their retirement, it is still possible for them to withdraw a part of their EPF corpus in case of any emergencies, under certain conditions. This withdrawal of funds from the EPF is termed as EPF loan. Let’s discuss how and when you can take an EPF loan in this blog!
EPF Loan Eligibility Criteria
Employees are eligible to take an EPF loan only under the following conditions-
- Construction/Purchase of a property
- The employee must have completed at least 5 years of continuous service
- Employee can withdraw an amount equal to 24 times the monthly salary for purchasing a new property or 36 times the monthly salary for purchasing and constructing a new property at the most
- Only the EPF account holder and/or his/her spouse can apply for EPF withdrawal in this case
- Repayment of home loan
- The employee should have been in continuous service for 3 years
- 90% of the total EPF corpus can be withdrawn
- Only the EPF account holder and/or his/her spouse can apply for EPF withdrawal in this case
- Medical treatment
- There is no condition on the employment duration in case of EPF withdrawal for any medical treatment
- Employees can withdraw an amount equal to his/her share along with interest or 6 times his/her monthly salary, whichever is lower
- The EPF account holder, his/her parents, spouse or children can apply for the withdrawal
- Wedding
- The employee must have completed at least 7 years of continuous service
- 50% of the employee’s contribution along with interest can be withdrawn by the employee
- The EPF account holder, his/her siblings, and/or his/her children can apply for the withdrawal
- Education
- The employee can withdraw a maximum of 50% contribution that has been made to the EPFO
- The EPFO member must have completed at least 7 years of service
- Employees can withdraw a maximum of three times
- The EPF loan can be taken for the post-matriculation education of the employee’s children
- Company Lock-out
- An employee can take the EPF loan if the company has been closed for 15 days or more or if the employee has not received his/her salary for two months or more
- The employee can withdraw an amount equal to unpaid wages; however, only the employee’s share can be withdrawn
- If the company has been closed for more than 6 months, the total contribution (employee and employer) can be withdrawn
- Retirement
- The employee can withdraw upto 90% of his/her EPF balance one year before the actual retirement date or after he/she attains the age of 54 years, whichever is later
- Unemployment
- The employee can withdraw 75% of his/her EPF contribution in case he/she remains unemployed for a duration of 1 month. However, the entire EPF amount can be withdrawn in case the employee remains unemployed for a time period of 2 months or more
EPF Loan – Apply Online
Follow these steps on the EPFO online portal to avail an EPF loan-
- Log in to the UAN member portal using your credentials
- Click on ‘Online services’ from the top menu bar
- From the dropdown menu, select the option of ‘Claim (Form-19, 31 & 10C)
- The next screen that opens will display all the member details
- On this screen, you need to enter the last 4 digits of your bank account number and click on ‘Verify’
- Sign the Certificate of Undertaking by clicking on ‘Yes’ and proceed with the steps
- Now, to withdraw your funds online, you need to select the ‘PF Advance (Form 31)’ option
- This will open a new section of the form, asking you to select the ‘Purpose for which withdrawal advance is required’
- In the same section of the form, you will be asked to enter the withdrawal amount along with the employee’s address
- After entering the details, ensure to tick mark on the certification to finally submit your EPF withdrawal application
- It is important to note that depending on the purpose of your withdrawal, you might also be asked to submit certain scanned documents
- After completing all the formalities, click on ‘Get OTP’
- Enter the OTP sent to your registered mobile number and your request will be submitted
EPF Loan – Maximum Amount Limit
EPFO allows a limited amount to be withdrawn from the employee’s EPF account. This amount depends upon the purpose of EPF loan. Explained below is a detail of the same-
Purpose of EPF Withdrawal | EPF Withdrawal Limit |
Purchase of home or land | 24 times the monthly salary for purchasing a new property or 36 times the monthly salary for purchasing and constructing a new property |
Repayment of Home loan | Upto 90% of the total EPF corpus |
Medical emergency | Total corpus or six times the monthly salary plus dearness allowance- whichever is lower |
Wedding | 50% of the total EPF contribution till date |
Education | Upto 50% of the employee’s share of contribution |
Company Lockout | Amount equal to the unpaid wages |
Retirement | Total corpus |
Unemployment | 75% after 1 month of unemployment, 25% after 2nd month of unemployment |
1 year before retirement | Upto 90% of the total corpus with interest |
Home Renovation | 12 times the monthly salary |
EPF Loan – Terms & Conditions
- The total corpus accumulated in the EPF account can be withdrawn only upon retirement of the employee (Note that early retirement is also possible only after 55 years of age and not before that)
- Employees can withdraw 90% of their EPF corpus before 1 year of their retirement
- Considering the COVID-19 pandemic or similar situations when there might a lockdown in the entire country, EPFO has allowed withdrawal of EPF if an employee faces unemployment before retirement due to lockdown or retrenchment
- The new rules laid down by the EPFO also state that only 75% of the total EPF corpus can be withdrawn after 1 month of unemployment, while the remaining will be transferred to the new EPF after gaining employment
- Employee who link their UAN and Aadhaar to their EPF account can seek approval for EPF withdrawal from their employers online
- Employees must have their active UAN, bank details linked with their active UAN and details of their Aadhaar and PAN as seeded into the EPF database
Documents Required for EPF Loan
Employees must submit the following documents to apply for an EPF loan-
- Form 19 – For the final settlement
- Form 10C – For pension withdrawal benefit
- Form 31 – For partial withdrawal in case of emergency
How can you Check the Status of your PF Loan?
To check your PF loan status, follow these steps-
- Log in to the EPFO online portal
- Go to the ‘Services’ tab and click on ‘For employees’ option
- On the next screen that appears, again click on ‘Services’ followed by ‘Know your Claim Status’
- Enter your UAN and password to log in
- Next, you will be asked to enter your EPF account number, establishment code and the state where your PF office is located
- After entering these details, your EPF loan status will be displayed on the screen
Wrapping it Up:
While it is possible to withdraw the EPF corpus before retirement, it is still advised that you do not do so. This is because early withdrawals from the EPF are not a part of the tax-deductible income of the employees. It is, instead, a taxable income if withdrawn before retirement. Hence, it is better to let the corpus accumulate and withdraw it only after retirement and not before that. However, EPFO allows its members to withdraw a certain amount as an advance, more so known as EPF loan in case of certain financial requirements such as illness, wedding, purchase of a property, renovation of home, education, etc. Online EPF withdrawal requests can be settled within 15 to 20 working days from the date of submitting the request.