5 Essentials to know – how EPF can help you buy your dream house?

Have you ever thought if you can tap into EPFO savings to buy your dream house? You might feel butterflies in your stomach if I tell you that it is true. But the question is if you must do it? There is a major reason for not doing it – EPFO is for safeguarding your retirement. 

Apart from this, the government of India has already introduced an EPF housing scheme for all PF members that helps buy your dream house. Here is everything you need to know about how the EPF housing scheme can help you buy your dream house.

What is the EPF housing scheme?

To achieve the government’s objective of “Housing for All” by 2022, the EPF housing scheme was introduced in 2017, especially for middle-class real estate buyers.

Some features of this scheme are:
  • Withdrawal of up to 90% of accumulation in Provident Fund Account(s)
  • Assistance in building one million houses in upcoming years
  • Payment directly to real estate agency
  • Besides lump sum withdrawal, EPFO members can also choose part or full loan repayment out of monthly PF contributions
  • Provision of EMI for loan repayment
  • Withdrawal allowed only once
  • PF membership of three years minimum is required to apply for the scheme
  • Minimum INR 20,000 must be maintained in individual or including spouse’s PF account
  • Purchase your dream home from any government or housing agency registered under the scheme
  • Avail interest subsidy up to INR 2.20 lakhs in Credit Linked Subsidy Scheme (CLSS)
  • Scheme and subsidy disbursed by Ministry of Housing and Urban Poverty Alleviation (MoHUPA), Government of India through HUDCO and National Housing Bank
Five essential things to know before applying for the scheme
  • EPF Withdrawal Rules

EPFO members withdrawing money must note that this facility can only be availed if the members are registered under a housing society having 10 or more members. Besides, you must also maintain INR 20,000 in individual accounts or including that of your spouse’s PF account.

While 90% of the accumulated amount can be withdrawn, here are some things to note:

Reason to Withdraw PF AmountWithdrawal Cap
To buy plotBasic salary of 24 months and dearness allowance
To build a house/ buy ready-to-move-in real estate property/ repay home loan in a lump sum or EMIBasic salary of 36 months and dearness allowance
To renovate existing real estate propertyBasic salary of 12 months and dearness allowance
  • Money withdrawal process from EPF housing scheme

After becoming a member of a housing society, you can apply for PF withdrawal to buy your dream home. Applications for the same can be submitted online or at your nearest EPFO office.

To apply, keep the following documents handy:

  • Universal Account Number (UAN)
  • Aadhaar number linked with UAN
  • PAN linked with Aadhaar or UAN
  • Bank details registered with UAN

To apply for a home loan through housing societies, members must submit Annexure I and relevant documents on the EPFO website to the EPF Commissioner.

To apply for PF withdrawal for loan repayment, submit Annexure I and Annexure III along with the required documents.

  • Tax on withdrawal

Tax is applicable on withdrawal of PF amount for financial distress caused by reasons other than COVID-19 wherein your PF balance is INR 30,000 or more at the time of withdrawal. Also, if the member has not completed five years with the EPFO and the withdrawal amount is more than INR 50,000, it is subject to tax laws. Under section 192A of the IT Act, 10% TDS is applicable on withdrawals (linked with PAN) above INR 50,000. However, 34% TDS is charged if the withdrawals are made without PAN. If your total income is below the taxable limit (INR 5 lakhs in most cases), you can submit Form 15G and 15H to avoid TDS. 

  • Eligibility and other criteria

A person is only eligible for withdrawals under the EPF housing scheme if they have been a consecutive member of the EPFO scheme for three or more years. It not only reduces the real estate loan amount but also reduces the interest on home loans. It must be noted that the payments are made directly to the housing society or the bank mentioned in the documents and not your personal account.

However, if you resign or leave your current job, the amount available in your EPF account is depleted directly. EPFO is not liable for any payment or benefits in such scenarios.

  • Loan repayment facility

There are multiple avenues to fund the purchase of your dream home. Even the loan repayment can be done in easy instalments. EMIs can be made directly to the bank or society from future PF contributions. However, the details can be confirmed during the loan application process.

Buy your dream home through EPF housing scheme

If you are aware of your monthly or daily spending’s and can afford to buy a home, this scheme is definitely for you. However, if you can not pay a lump sum for purchasing your dream home, the scheme also has various provisions.

Either way, the EPF housing scheme is only available to make sure you can buy your dream home even if you do not have full cash flow. 

Disclaimer: The views expressed above are for informational purposes only based on industry reports and related news stories. PropertyPistol does not guarantee the accuracy, completeness, or reliability of the information and shall not be held responsible for any action taken based on the published information.

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