How to Withdraw PF for Home Loan Repayment? Here's The Complete Guide

Under certain conditions, the subscriber is permitted to make a partial withdrawal, or "advance" withdrawal, from the PF corpus by the Employees' Provident Fund Organization, or EPFO, the nodal organization that oversees employee provident fund (EPF) payments. 

The repayment of a loan is one of them. It is also possible to withdraw money from your EPF account in order to buy or build a home.

Rules for Repayment of Home Loan:

The repayment of any outstanding home loan held by the employee investor or the spouse is permitted under Section 68-BB of the EPF scheme.

This means that an employee can use their EPF balance to pay off any loans they may have taken out for a house down payment that are still outstanding.

How much money can be withdrawn?

The PF member can withdraw up to 90% of the corpus for the purpose of paying off the outstanding home loan if the property is owned jointly or in his or her name.

What are the conditions for withdrawal?

According to EPFO, you must have completed at least three years of service in order to withdraw money for a home loan.

Additionally, the state government's registered financial institutions, public financial institutions, non-banking housing finance firms, state housing boards, and municipal corporations had to be used to obtain the home loans in this scenario.

How many times can employees withdraw pf for home loan repayment?

One time only is allowed to use the PF withdrawal option for this purpose.

What are the tax implications?

A PF withdrawal is taxed under the legislation if it is made before the five-year period following PF account opening. The "Income from other sources" head will apply to tax this withdrawal.

If the EPF balance is withdrawn before five years of employment, TDS (Tax Deducted at Source) is deducted at a rate of 10% from the sum. If a PAN is not given, if the employment service is less than five years, TDS might be deducted at the highest slab rate of 30%.

If there is a hiatus in contributions to the account for five years straight, the EPF amount is likewise taxed. In that situation, the full amount of the EPF is regarded as taxable income for that fiscal year.

How to put the claim online?

The subscriber must have a functioning Universal Account Phone (UAN) and a functional mobile number in order to submit an online application for EPF withdrawal.

By providing data such as an Aadhaar number, a PAN number, and bank information, the UAN should be Know Your Customer (KYC)-verified.

Through EPFO's unified portal, unified portal-mem.epfindia.gov.in, subscribers can submit a claim for "advance" withdrawal. The employer is then notified to approve the claim. The sum is added to the subscriber's account once it has been approved.

Should you withdraw PF?

Home loan interest rates have recently increased after the RBI repo rate increases. Given this, some borrowers may be thinking about prepaying their debt in full or in part using the EPF corpus.

However, financial professionals advise against taking PF withdrawals before retirement. EPF operates on a compounding basis, and the corpus can generate significant rewards if allowed to grow.