Every working individual saves and invests their hard-earned money wisely to create a financial safety net for retirement. For many employees in India, the Employees Provident Fund (EPF) is that safety net.
EPF is a retirement benefits scheme offered by the Employees’ Provident Fund Organization (EPFO). The fund provides better returns compared to some popular investment instruments. At the same time, it also comes with tax benefits.
But that’s not all. If you ever face a financial crunch or an emergency before retirement, you can partially or fully withdraw your funds by availing of an EPF loan.
Now, you may wonder what an EPF loan is, its eligibility criteria, and how to apply for it. We answer all your questions in this blog post.
As you know, employees make monthly contributions to the EPF scheme equal to 12% of their monthly basic salary and dearness allowance. Generally, they withdraw a lump sum amount at retirement.
However, you can also withdraw from your provident fund corpus in part or in full before retirement by availing of a loan on an EPF account.
The EPF loan is available for specific financial needs like education, home renovation, marriage, etc. Once you apply for a loan on your EPF account, EPFO reviews your application. If approved, the amount is transferred to your bank account in 15-20 days.
Suppose you apply for a secured loan. You will be granted a loan amount based on the value of the collateral. And you’ll have to repay the amount plus interest within the stipulated tenure.
However, with an EPF loan, you can withdraw from the funds accumulated in your EPF account before retirement. You neither have to pay any interest on the withdrawn amount nor you have to repay the amount to the fund.
EPF loan is available only for certain use cases. EPFO has also laid down conditions like withdrawal limit, mandatory years of service, etc., which change based on your reasons for withdrawal. Eligibility for EPF loan based on different use cases is explained below:
| Purpose of withdrawal | Withdrawal limit | Mandatory years of service | Other conditions |
| Education | You can use 50% of your EPF corpus as a loan. | You must mandatorily serve 7 years before you can withdraw from EPF. | You can use the amount for your or your child’s post-matriculation education. |
| Medical treatment | You can withdraw 6 times your dearness allowance plus your monthly salary. | No such condition. | You can use the EPF loan for your medical, spouse, and children’s treatments. |
| Purchase of house/land | For the house, you can withdraw up to 35 times your dearness allowance + monthly basic salary or your EPF contribution along with interest. As for the land, the limit is set to a maximum of 24 times. | You must have served 5 years. | The property you purchase must be in your or your spouse’s name or jointly owned. |
| Home renovation | 12 times your monthly basic salary and dearness allowance, or your EPF contribution with interest, or the total cost of renovation, whichever is lower. | 5 years of service is mandatory. | The property must be in your or your spouse’s name or jointly owned. You can withdraw from your corpus twice. First, after 5 years of completion of your house. Second, after 10 years of completion of your house. |
| Home loan repayment | 36 times your monthly basic salary plus dearness allowance, or total EPF contribution plus interest or an amount equivalent to the total outstanding principal and interest on your housing loan, whichever is lower. | 10 years of service. | The property must be in your or your spouse’s name or jointly owned. The total contribution plus accumulated interest in your EPF account should be more than Rs 20,000. |
| Marriage | 50% of your EPF contribution. | 7 years of service. | Funds can only be used for your marriage or the marriage of your child and sibling. |
| Natural calamity | Up to 50% of your share in EPF. | No condition. | You must have the certificate of damages induced due to the disaster. |
An EPF loan is a premature withdrawal from your EPF account and not a traditional loan that requires repayment. Since the amount withdrawn does not need to be repaid, there is no interest rate on such withdrawals. However, you will lose out on potential interest earnings on the withdrawn amount.
EPF interest is calculated on the monthly balance in the account, with the current rate at 8.25% for the financial year 2023-24. Therefore, while there is no direct interest in the withdrawal itself, you miss out on future interest accumulation.
An EPF loan calculator helps you determine the impact of a premature withdrawal from your EPF account. It calculates the amount you can withdraw based on your EPF balance and tenure of service. By entering details such as the current EPF balance, withdrawal amount, and duration of service, the calculator provides insights into the overall impact on your EPF account.
Now, let’s walk you through the steps to apply for a loan on your EPF account. You can apply for a loan both offline and online. See the steps below.
A. How to Apply for an EPF Loan Offline?
Step 1. Head over to the EPFO Portal and download the Form-31 (EPF loan form).
Step 2. The form requires you to fill in details like withdrawal amount, reason, years in service, etc.
Step 3. Submit the form with your organisation.
Upon submission of the form, your organisation will forward it to EPFO. After EPFO’s review and approval, your loan will be sanctioned.
B. How to Apply for an EPF Loan Online?
Step 1. Visit the EPFO portal and log in with your Universal Account Number (UAN) and password.
Step 2. Navigate to the Online Services section.
Step 3. Now, select the Claim Form – 19, 31 & 10C option. And then, enter details like your name, date of birth, PAN, mobile number, etc.
Step 4. Next, enter bank details, like your account number and IFS code. Click Verify.
Step 5. Lastly, provide the reason for withdrawal and the amount you wish to withdraw. Submit your application.
EPFO will now review your application. If approved, your EPF loan will be sanctioned.
You need the following documents to avail of a loan on an EPF account:
1. Form 19 is needed for the final PF settlement.
2. Form 31 is needed for any premature withdrawal from your EPF corpus.
3. Form 10 – C is needed for pension withdrawal benefits.
Besides, employees must have their PAN and Aadhaar linked with the EPFO database.
To check your EPF loan status, follow these steps:
Step 1: Visit the EPFO website, navigate to the “Services” tab, and click on “For Employees.”
Step 2: Select “Know Your Claim Status” from the “Services” section.
Step 3: Log in using your UAN and password. Enter your EPF account number, establishment code, and the state of your PF office to view the status of your loan claim.
To learn more about EPF loans, download the Tata Moneyfy Loan app.
You can obtain a loan against PF for urgent financial needs such as medical expenses, home repairs, education fees, or other significant personal expenses.
You can avail of a loan for 50% of the fund in your EPF account for a maximum of three times. Additionally, you can only withdraw the money after completing 5 years of service.
It typically takes 20 days to process an EPF claim.
EPF withdrawals are generally tax-free if you have completed five years of continuous service. If the withdrawal is made before completing five years, it may be subject to tax.
Yes, you can check your EPF account statement online through the EPFO website.
Yes, an employee can contribute to their EPF account, if they continue to work after retirement.
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18 December 2024
7 mins read
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