Loan Against Employees Provident Fund (EPF)

Last Updated : May 5, 2020, 11:10 a.m.

Employees Provident Fund (EPF) is one of the most popular financial tools used by the salaried class to accumulate retirement corpus. Organizations make it a point to deduct a certain portion of your salary towards the EPF. You can see that in your salary slip showing the employee contribution towards his/her EPF account. An equitable contribution is also made by your employer.

The employer deducts a compulsory 12% of your basic salary + dearness allowance + retaining allowance and marks it as your contribution. The same 12% is contributed by the employer too. But 8.33% of it is diverted towards the pension fund and the rest remains with the EPF. The contributions made also earn you interest. Presently, the rate of interest on EPF stands at 8.50%.

But do you know you can avail of a loan against your EPF contributions too? Yes, it’s possible! Advances against EPF reserves are not treated as typical loans and, therefore, you don’t need to pay any interest on the same. However, the loan against provident fund is available only for the below-mentioned purposes.

• Marriage
• Education
• Critical illness
• Purchase or construction of homes
• Purchase of a plot
• Repayment of home loans
• Renovation of Home

Loan Against EPF Norms for Marriage

You can get loan against EPF for the marriage of your son, daughter, siblings, or even yours. But you can’t withdraw your entire contribution including the accrued interest. Yes, you can withdraw upto 50% of your contribution for marriage. Plus, you must have been contributing to EPF for a minimum of 7 years. You can withdraw for a maximum of 3 times for the said purpose. For the advance to be sanctioned, you should submit the marriage invitation card at the time of applying for a loan against provident fund contributions.

What Do You Need to Get Advances for Education?

Be it the education of yours or your son or daughter, you can withdraw from the EPF proceeds. Like marriage, the loan against provident fund for education is restricted to 50% of your EPF contribution including the interest accrued on the same. You must have been an EPFO member for at least 7 years. The maximum withdrawal is capped to 3 times only. You may need to submit a valid proof showing the educational course you want to study and the fees involved in the same.

Do You Need to Meet Any Service Criteria While Applying for Advances to Meet Medical Expenses?

If you’re looking to apply for a loan against provident fund for medical expenses, there’s no specific service period you should complete. You can get it anytime but only once. This facility is given for the medical treatment of self, your son, daughter, spouse or even your father and mother. The loan against EPF sanction is dependent on Certificate C signed by both employer and doctor. You can get a maximum loan equating to the basic salary and dearness allowance of the last 6 months or your share with interest, whichever is lesser.

EPFO Advance Norms for Repayment of Home Loans, Purchase of a Home or Plot

If you want to purchase or construct a house, the maximum advance is the lowest of the basic salary and dearness allowance of 36 months or EPF contribution. However, for the purchase of a plot, the basic salary and dearness allowance of 24 months will be considered. In both these cases, one must have worked for a minimum of 5 years.

In case you are finding it hard to service the home loan EMIs, which are usually quite high, the retirement body i.e. Employees Provident Fund Organization (EPFO) has a solution for you! You can use as much as 90% of the provident fund corpus including your share and interest as well as the employer’s share and interest. The minimum service period required for the same is 10 years. EPFO, has, however, laid down certain conditions for getting such a high proportion of loan against EPF. Take a look at such conditions below.

• Either you or your spouse or both of you should be the registered owners of the property
• The minimum accumulation in the EPF of either you or your spouse or together must be above INR 20,000
• One must submit a loan statement from the lender showing the payment made so far and the payment that is left to do

Can You Get a Loan Against EPF to Renovate Your Home?

Yes, you can! Not once but twice. You can get a loan against PF for the first time when the home is more than 5 years old. If you wish to withdraw again for the said purpose, you need to wait for 10 years from the first withdrawal. The maximum advance is restricted to the basic salary and dearness allowance of the last 12 months. However, the house property needs to be owned by you or jointly owned with a spouse as a co-applicant.

Does EPFO Allow Withdrawals to Combat Natural Calamity-related Damages?

Yes, it does! There’s no denying that natural calamity can come anytime to haunt you with colossal damages. All you need to do is to provide certificates issued from the competent authority authenticating the damages done to you in the wake of natural calamity. There’s no need for you to complete service periods for the loan to be sanctioned. Here, the loan against EPF will be a maximum of 50% of the employee share can be given as the loan amount.

Are You Allowed to Withdraw When Your Organization is Locked or Closed?

Yes, you are! In case the lockout spans for more than 15 days and the employees get unemployed without any compensation, the withdrawal is allowed upto employee share to EPF along with the accrued interest. The same provident fund withdrawal norm is there when the employee does not receive the salary for more than 2 months for reasons excluding the strike. If the lockout sustains for more than 6 months, you can withdraw upto 100% of the employer share with interest. In both these cases, you need a certificate from your employer in Form A and B. In case you are discharged, dismissed or retrenched based on the court proceedings, the provident fund based loan disbursal is limited to 50% of the employee share with interest. You need to submit a copy of the petition filed in the court and certificate stating that the case is pending.

Does the TDS Apply to Loan Against EPF?

Yes, it does! The table below shows the rate of the Tax Deducted at Source (TDS) on a loan against EPF at different points of time.

How to Get a Loan Against EPF?

After knowing the withdrawal norms related to the purposes for which advances are granted against EPF, it’s time you should know how you can apply for the loan against EPF reserves. All you need to do is to submit Form 31 along with other necessary documents to your organization, which will then forward the same to EPFO for authentication. Details to be filled in Form 31 include the following

• Account number of the EPF account from which you wish to get the advance
• Bank account number where you want to get the amount credited
• Salary details

The Bigger Question is – How to Get Form 31?

For this, you should visit the portal of EPFO and get to the Unified Member Portal. From there, you will need to do the following –

• Log in using the Universal Account Number (UAN) and password
• Go to ‘Online Services’
• Click on ‘Claim’
• You will need to input the bank account number seeded against your UAN
• Click on ‘Verify’
• If the account number is seeded against UAN, you will get to know of the same

So, What is UAN?

UAN is a 12-digit account number which you get from the EPFO. Doesn’t matter whichever you switch to, the UAN will remain the same. EPF account numbers of different organizations will, however, vary. If you don’t have the UAN, you can get it created on the website of EPFO by giving a few details.