Given the high cost of home loans, it may be wise to use the employee provident fund (EPF) to repay your outstanding loan in whole or part, depending on the corpus available.
But first, you must understand the process, such as eligibility, the documents required, withdrawal limit, tax liability, if any, etc. For example, you can withdraw the provident fund (PF) amount for home loan repayment only if you have completed five years of continuous service with your employer. Otherwise, you will be ineligible for withdrawal.
Moreover, depending on the withdrawal purpose, you can withdraw only a specific percentage of your PF balance. For example, you can withdraw a maximum of 90 per cent for home loan repayment. Also, the amount would be taxable if you haven’t completed five years of continuous service.
Additionally, you must consider whether a PF withdrawal could adversely impact your retirement savings. Since the PF corpus is built to provide financial security in your retirement years, it is essential to consider all the pros and cons of such a move in advance.
Though repaying your home loan could significantly reduce your burden of equated monthly instalments (EMIs), you must also have enough savings for daily expenses and emergencies. If in doubt, consult an advisor to assess the impact of PF withdrawal on your retirement savings.
What To Check
Before you apply for a PF withdrawal online, check if you have all the documents to complete the application process, or Form 31, the form to request an advance from the PF account. You will need to submit the form along with the required documents to the EPFO office or employer.
Here’re a few things you need to check.
The employees’ provident fund organisation (EPFO) may take a few days or weeks to verify the documents and process the approval before crediting the amount to your bank account.
Activate the Universal Account Number or UAN.
Link and verify the Aadhaar number with UAN.
A KYC-compliant EPF account, including bank account details, IFSC code, etc.
The EPFO records should have your accurate birth date.
Verification is also done through your registered mobile number with the Aadhaar card.
Step-By-Step Guide
Log into the EPFO e-SEVA portal and enter your UAN, password, and captcha code to log in.
Go to the “Online Services” area.
Select “claim form 31” from the dropdown menu.
Enter your bank details and click verify.
Check the terms and conditions.
After reading them, proceed with the online claim—like selecting the purpose of the advance, the amount required, etc.
Upload the documents and submit the application.
