There are a few things that you need to know about using your PF account to raise fund for purchasing a house property. EPF accounts too are eligible for the same purposes. The facility is subject to the fulfilment of certain conditions.
- 1.The contribution to the PF account should have been done for a continuous period of at least five years.
- 2.The money thus withdrawn can be used to purchase/construct a house.
- 3.The plot of land on which the construction is proposed should be owned by you or your spouse or jointly by both.
- 4.The withdrawal is restricted to 90% of the balance in PF account.
- 5.The withdrawal can be availed of for the purposes of both the purchase/construction of property or paying off the housing loan.
It also depends upon the purpose behind purchasing a property. For buying a plot, the PF withdrawal should be limited to 24 month’s basic salary of the employee pls Dearness Allowance or the actual price of the plot of land. It shall in no case exceed the cost of land.
For the purpose of buying a house or constructing it the PF account holder can withdraw 36 months basic salary plus DA. The maximum amount is again restricted to the actual price of land or cost of construction of property.
The property should be in the name of the PF account holder or jointly in the name of the account holder along with his spouse.
Similarly, the land which is going to be used for construction purposes should be in the name of PF account holder or he/she should jointly own it with his/her spouse.
The construction should begin within six months and should get completed within 12 moths of the last instalment of withdrawal.
When you opt for a ready to move in house the deal needs to be completed within six months. Withdrawals for purchase/construction can be made in one or more instalments depending upon the circumstances.
Renovations involving additions or improvements to a residential house owned by the PF account holder, his/her spouse or both is also possible. Irrespective of whether you had withdrawn money to construct the same house, you are eligible to withdraw money for renovation. It is restricted to 12 month’s basic salary and DA and should not exceed cost of such improvement. The withdrawal can only be availed of after five years from completion of construction of the house.
Here are the reasons to withdraw and the maximum withdrawal limits.
PF Withdrawal Reason (Withdrawal Limit)
For buying Plot: 24 months’ basic salary and DA
For constructing a house: 36 months’ basic salary and DA
For buying a ready-to-move in house: 36 month’s basic salary and DA
For home improvement/renovation: 12 month’s basic salary and DA
For repayment of housing loan: 36 months’ basic salary and DA
Repayment of a housing loan: The PF rules allow to repay the housing loan out of the PF outstanding balance taken by you or your spouse. The amount is restricted to a maximum of 36 month’s basic salary and DA. The loan should have been taken from specified entities like governments and state governments, registered cooperative societies, state housing board, nationalised bank, public financial institutions, municipal corporations or any development authority, for purchase of a house. This facility can be availed of only after contribution to the PF account for at least ten years.
Is this a suggestible option? Experts are of the opinion that financing a house property might not be a good idea by withdrawing money from PF account. As the PF/EPF is basically meant to take care of your monetary needs during your retired life. The corpus gets compounded resulting into a good assurance for later years of your life. Better you manage the house funding without disturbing the PF/EPF account.
Bhoi Smrutirekha Dharanidhar