Employee Provident Fund or EPF is a retirement benefits scheme approved by the Indian government for salaried employees. Under this scheme, a small sum of money is contributed by employees from eligible organizations from their monthly basic pay in their PF(Provident Fund) accounts.
Employees can withdraw a sum of money from their PF accounts and make use of the withdrawn money as a personal loan. While the name may signify that it is a loan, it is not like the typical personal loan where the person needs to repay the amount to the bank. In a PF loan, the repayment procedure is not included, as it is non-refundable.
The Employer’s Provident Fund Organization or EPFO oversees this procedure and allows an employee to withdraw money only after the reason is verified and justified. Usually, an employee who is in service for 5 years or above is sanctioned a loan from his/her PF account. This condition can change according to the reason for applying for a PF loan.
There are two ways through which you can apply for a PF loan. They are as follows:
Before you submit an online application to avail of a PF loan, you must meet the following requirements:
Once you meet the above requirements, you won’t need the attestation from your previous employer.
The following are the documents that are required for a PF loan:
Though PF loans do not have an interest rate, you will have to pay a specific cost. This cost is calculated in terms of the amount which would have accumulated as an interest rate on the withdrawn amount had you not taken it out. The interest which is calculated on EPF deposits is 8.5%. This rate is based on the monthly running balance.
As mentioned above, the EPFO will approve of a loan from your PF account only when your reason to apply for it is justified. This process ensures that employees do not take advantage of a PF loan and withdraw small amounts frequently. Saving in a PF account leads to the financial stability of an employee even after retirement. And so, frequent withdrawal of cash is not encouraged while the employee is still in service. If you wish to apply for a PF loan, then you can check out some of the reasons below for which such a loan is usually approved:
Marriage: In India, a wedding is not usually a one-day event. It spans for days. Therefore, a hefty amount of money is spent on the festivities. So, if you want to withdraw money for this reason, then the following are some of the conditions which should be met:
Illness: To withdraw money for medical purposes, the following are the conditions that you must adhere to:
Renovation or Construction of a House: To own a house is a dream for many people. If you want to renovate your old house or construct a new one, then you can take a PF loan. Check the conditions required
Education: If your child has bagged a seat in a university or college, then you can withdraw money from your PF account to contribute to the cause. Check the conditions below if you wish to take a loan for education purposes
To Buy Land: If you wish to buy a piece of land, then you can withdraw money as a PF loan from your PF account. You can check the conditions below to know more
Lock-out of the Company: If any employee stops receiving his/her salary in the event of a lock-out, then he/she can withdraw money from his/her PF account after meeting the following conditions:
Unemployment: Those who are unemployed for a month can withdraw up to 75% from their PF accounts. If one is unemployed for 2 months and above, then he/she can withdraw the entire contribution from his/her PF account.
Apart from the above, one can also apply for a PF loan in the event of a natural calamity.
The coronavirus pandemic has wreaked havoc across the world and has led to the loss of millions of lives. With lockdowns enforced, many people have also lost their sources of income. To help affected employees in such turbulent times, a special provision has been added in the EPF Act by the EPFO. Under this provision, an affected person can withdraw a non-refundable COVID-19 emergency advance from his/her PF account.
Check the Eligibility Criteria Below:
If you wish to avail of the EPF COVID-19 Emergency Advance then you must fill the online claim form. Make sure that your UAN is validated with your Aadhar card and the KYC of your bank account. You must also link your mobile number to your UAN to ensure the completion of the withdrawal process.
You can even use the Unified Mobile Application for New-age Governance or the UMANG app to avail of the COVID- 19 Emergency Advance.
It is easy to calculate the loan amount which will be sanctioned to you. We will explain with an example. Let’s say Miss Kavita has applied for a COVID-19 Emergency Advance loan. She has a balance of INR 2.5 lakhs in her PF account. Now, the sum of her monthly basic wage and DA is 25000. So, the total amount for three months would be 75000. If we calculate 75% of INR 2.5 lakh, it will be INR 187500
Now since the sum of Miss Kavita’s DA and basic wage is less than 75% of her PF account balance, she will be able to withdraw INR 75000 as her COVID-19 Emergency Advance loan.
Check the status of your loan
To check the status of your EPF Advance claim, follow the steps below:
Yes, you must contribute to your PF if you receive a salary of INR 15000 or more and you work at an organization where the workforce is over 20. If your organization’s workforce is less than 20, they can opt to get enrolled in EPF.
No, employees are not required to submit the forms to their employers.
No, the tax will not be deducted if you have been in service for five years consistently. If you have not worked continuously for five years, then tax will be deducted on the amount which is provided by the employer to the EPF.
Yes, you can check it online by visiting the official EPFO portal. However, you can access this feature only if you are still contributing to your PF account.