How to Take a Loan Against PF

What is a Loan Against PF? 

Everyone  faces a time when they will require funds to deal with an emergency. But apart from borrowing it from a bank, one can also take a loan against one’s PF. There is a provision for partial withdrawals during the PF tenure to assist employees in financially challenging times. Advances against EPF reserves are not typical loans, so you do not have to pay interest on them. However, the loan against the provident fund is available for the purposes listed below:

Marriage,

Education,

Critical illness, 

Purchase or construction of House 

Purchasing a plot,

Home loan repayment, and 

Renovation of Home. 

How to Get a Loan Against PF 

To avail  a loan against EPF, employees must apply for premature withdrawals. One can execute the entire process online on the EPFO portal: 

To begin with, account holders must ensure that their Know Your Customer (KYC) information is linked to their Universal Account Number (UAN).

• Log into the portal using your UAN number. 
• Fill out and submit Form 31, an advance form, and other required documents. 
• The EPFO thoroughly reviews the application to ensure that the reasons are valid. On successful verification, the employee can take a loan against PF. 

After knowing about the withdrawal rules, you should know how to apply for an EPF loan. 

• All you have to do is submit Form 31(one can get Form 31 from the EPFO website by entering their 12-digit UAN number) along with the other required documents to your organisation, which will then forward it to EPFO for validation.
  
• The following information needs to be entered on the form 31 – account number of the EPF account from which you would like to receive the advance, bank account number to which you want the funds credited, salary information.

EPF Loan Eligibility Calculation

The eligibility to avail of an advance from your EPF account depends on the purpose behind the withdrawal. Which are summarised in the following table:

NOTE: The following are some additional requirements that must be met to file online EPF withdrawal claims.

• You have activated the Universal Account Number (UAN).
• The mobile number used to activate the UAN must be active to receive OTP (one-time password).
• Your Aadhaar Card information must  exist in the EPFO database. Further, when filing the claim, you should have used UIDAI’s OTP-based facility for eKYC verification.

.The rules for loans against PF accounts vary based on the reasons for which one is making partial withdrawals. Here’s a quick rundown:

• If one is withdrawing to get married or fund the marriage of a sibling or child, one can withdraw up to 50% of the PF contribution. The account holder must have been in service for at least seven years. 
• In the case of an illness suffered by the account holder, their parents, spouse, or children, one can withdraw the total contribution by one’s employee, or six months of Dearness Allowance (DA) and basic salary, based on which one is lower. 
• If you are planning to use the fund to buy a new home or construct a home, you need to have been in service for at least five years. The property must be in the account holder’s name, spouse, or joint ownership. The account holder can withdraw the total contribution, or up to 36 times the Dearness Allowance (DA) and the salary of the employee, whichever is lower. 
• Can withdraw up to 50% of the employee’s contribution for a child’s education. The employee must have completed seven years of service before up to three withdrawals can be made. 
• Employees can also withdraw to buy land. It must be in the account holder’s name, spouse, or joint ownership. The amount can be the total contribution made so far or 24 times the DA and salary of the employee, whichever is lower. 

How to Check Status of PF Loans.

You can check the status of your EPF advance claim by following these steps:

• Go to the EPFO’s official website and click on the “Services” tab.
• Select “For Employees” from the drop-down menu.
• Then go to the “Services” section and select “Know Your Claim Status.”
• To log in, enter your UAN and password.
• To check the status of your EPF claim, enter your EPF account number, establishment code, and the state of your PF office.

Final Thoughts

One of the most appealing aspects of the EPF is that if the contributed amount is withdrawn after five years of continuous employment or upon retirement, the entire amount and interest are tax-free compared to other taxed instruments such as fixed deposits; this feature helps beat inflation. Which makes  EPF  a valuable savings tool. As a result, it is advisable not to borrow against your PF balance and instead use it to save for the future. Budgeting for all other major life events and having medical health insurance in an emergency is preferable.

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