May 12, 2017 | 11:39 IST | SOURCE : Economic Times | Retrieved from Timesnow.tv
In an effort to make its ‘Housing for all by 2022’ a success, the government has allowed for EPFO members to withdraw up to 90 percent of their provident fund (PF) accumulations to make down payments to purchase a house and to pay housing loan EMIs.
Pre-requisites for PF withdrawal
In order to dip into the provident fund saving, the new rule highlights that the PF holder will only be eligible if he/she has been a contributing PF member for at least 3 years, and is buying property in a registered housing society that has at least 10 members.
Further, the property has to be purchased in the member’s name and cannot be purchased jointly with anybody else, except your spouse.
How the money can be used
The money withdrawn can only be used for an outright purchase, as a down payment for a home loan, for buying plots or for the construction of a house. The transactions can be made through central government, state government and even from a private builder, including promoters or developers.
Can the money be used to buy resale flats as well?
Unfortunately no, EPFO will only make payments directly to a cooperative society, the state government, central government, or any housing agency under any housing scheme, or any promoter or builder, in one or more installments. The rule will not apply to real estate purchases in the secondary market or resale transactions.
Can you withdraw both employee and employer contribution?
An EPFO member can withdraw his own share of PF contribution plus interest as well as the employer’s share of contribution plus interest.
Can you EMI payment through PF?
A PF member can use his PF contribution to pay full or part EMIs for a home loan taken in the member’s name. The EMI will be directly paid by EPFO to the government, housing agency or the bank.
How to apply
A PF member can apply individually or jointly through a housing society to get a certificate from the EPFO.
Through Annexure I form, an employee can ask for the balance and the deposits made in the last three months before applying. This will help the EPFO determine how much EMI can be arrived at.
Also, the employee has to mention the name and details of the bank or housing society to whom such certificate is to be issued.
The EPFO then issues a certificate showing the outstanding balance and last three month’s deposit in the account. Alternatively, members can take printouts of their PF passbook downloaded from the EPFO website and submit it to housing agencies or banks.
If a member wishes to use PF money to meet EMI’s, then in addition to Annexure I, an authorisation by the member is to be filled in a prescribed format. It will carry details such as PF amount, PF and loan account number, lender name, address etc. One has to get this form authorised from the lender i.e. branch manager of the lender who has sanctioned the loan. Once approved, EPFO will start transferring EMI’s online to the lender’s account.
What if an employee leaves his/her job?
The EPFO has made it clear that under no circumstances would it be liable for any default of payments to the lender. The EPFO will not be party to any agreement made between an EPFO member and a society or builder.
In case a member quits his job, the responsibility of repaying the loan would rest with the employee and not the EPFO.
While dipping into your PF account to make a down payment makes your life easier, it is important to remember, your PF is meant to take care of your post retirement needs, and depleting it may jeopardise your retirement.
So make sure you have a backup plan to meet postretirement needs through equity mutual funds or PPF.