EPF or Employee’s Provident Fund is a government-provided retirement benefits scheme provided to salaried individuals of India provided the employer meets the required eligibility criteria. Both employer and employee make an equal contribution to this fund, which can be withdrawn by the employee at the time of retirement with interest. However, there could be extraneous circumstances where a person may need money to overcome a stressful financial situation. To help EPF account holders in such situations, EPFO (Employees Provident Fund Organisation) allows emergency withdrawals, popularly known as EPF loan or EPF Advance. In the subsequent sections, key aspects of the EPF loan are discussed.
UPDATE: In view of the COVID-19 pandemic/shutdown and the resultant incomes loss for many salaried individual, EPFO has allowed all the EPF subscribers in India to take a non-refundable advance up to 3 months’ of basic wage and dearness allowance or 75% of the EPF account balance, whichever is lesser. More details of this EPF advance are provided in the COVID-19 Emergency Advance section.
EPF Personal Loan
Employer’s Provident Fund Organization (EPFO) allows employees to partially withdraw money from their PF accounts and use it as a personal loan to deal with emergency situations. While this is often referred to as an EPF Loan it is not exactly a loan but actually an advance as the amount withdrawn does not have to be paid back (non-refundable) in most cases (unlike in case of a personal loan). However, it should be noted that EPFO first verifies the reason for withdrawal and allows you to withdraw money from your EPF account if the reason is justifiable.
Following are the key reasons for which you can avail an EPF loan:
- Marriage:You can take an EPF advance for your own marriage or for your son’s and daughter’s marriage.
- Education: Education can also be the reason for PF withdrawal. You can get money to fund your own education or the education of your daughter, son, brother or sister.
- Purchase of home or plot: As purchase of home or plot requires a significant amount, the Employee Provident Fund loan is available to the applicant in this case.
- Medical treatment: If your spouse, daughter, son, father or mother is ill, you can withdraw your EPF for the treatment. However, the loan against the EPF can be received only in the case of serious illness.
- Home loan payment: The payment of the home loan can also be done through EPF advance, only if the applicant satisfies certain necessary conditions as specified by the EPFO Act.
- Calamity:Any natural calamity can bring you huge losses and EPF can be withdrawn in such a case.
- Addition/ alternation of house: The EPF loan can also be taken to renovate or expand your existing house.
- Lockout: During harsh situations of lockout, an applicant may stop receiving his salary. Thus, to cope with and afford basic necessities of life, the EPF loan is available to those applicants.
- Withdrawal before the retirement:An applicant can withdraw the majority of his/ her corpus before one year of retirement.
Also Read: Instructions and Guidelines for EPF Advances
EPF Loan Interest Rate
EPF Loan actually refers to a premature withdrawal, and hence it is not required to be paid back unlike PPF (Public Provident Fund) loan. As a result, it does not have an interest rate. The cost you have to pay for this loan is in terms of the amount that you could have earned as an interest on the amount withdrawn if you had not made the withdrawal. The interest on EPF deposits is calculated on the basis of monthly running balance and the present rate is 8.5% (as of Q1 FY 2020-21).
COVID-19 Emergency Advance
In order to ensure cash flow and liquidity in the hands of EPF subscribers during this challenging time of Coronavirus disease outbreak and lockdown, EPFO has added a special provision in the EPF Act to provide a non-refundable COVID-19 emergency advance.
- Eligibility for COVID-19 Emergency Advance: All EPF members employed in a factory or establishment, which is located in the area declared to be affected by the COVID-19 outbreak by the appropriate government are eligible. Since COVID-19 has been declared as a pandemic for the entire country, all employees across India are currently eligible for the EPF advance.
- Documents Required for COVID-19 Emergency Advance: No documents or certificates are required to be submitted by the employee or the employer to avail this benefit.
- Quantum of COVID-19 Emergency Advance: You can avail the non-refundable advance up to the sum of 3 months’ wages and dearness allowance or up to 75% of the EPF account balance, whichever is less.
Please note that the withdrawal is non-refundable, hence you need not pay back the amount and no interest charges will be levied.
Step-by-step Procedure to Claim COVID-19 EPF Emergency Advance
You can avail the EPF emergency advance by filing the online claim form, if your UAN is validated with Aadhaar and KYC of your bank account. Moreover, your mobile number should be linked to your UAN to complete the withdrawal process. Following is the step-by-step procedure for the same:
Step 1: Visit the Member Interface of EPFO Unified Portal and login.
Step 2: Navigate to Online Services>Claim section.
Step 3: Enter the last 4 digits of your bank account to verify.
Step 4: Click on “Proceed for Online Claim”.
Step 5: Select PF Advance/ Form 31 from the drop down menu.
Step 6: Select purpose as “outbreak of Pandemic (COVID-19)”.
Step 7: Enter the required amount and upload a scanned copy of cheque and enter your address.
Step 8: Click on “Get Aadhaar OTP”.
Step 9: Enter the OTP to submit the request.
Alternatively, you can use the mobile app UMANG (Unified Mobile Application for New-age Governance) to claim the emergency advance. Go to Home> EPFO> Employee Centric Services> Raise Claim> Login with the help of your UAN and OTP received on the mobile number to file the claim.
Also Read: COVID-19 Emergency Loans in India
EPF Loan Eligibility Calculation
The eligibility to avail an advance from your EPF account depends on the purpose behind the withdrawal. These are summarised in the following table:
|Reason of Withdrawal||Limit of Withdrawal||Minimum number of years in service||Other terms and conditions|
|Education||Up to 50% of employee’s share of contribution to EPF.||7 years||For either his education or his children’s after 10th class.|
|Marriage||Up to 50% of employee’s share of contribution to EPF.||7 years||For his own marriage or the marriage of daughter/ son/ brother/ sister.|
|Purchase of home or plot||For home: up to 36 times of monthly wage plus dearness allowance (component of the salary).||5 years||The land must be in the name of the employee or spouse or jointly owned.|
|For land: up to 24 times of monthly wages plus dearness allowance.|
|Medical treatment||6 times of wages plus dearness allowance||N/A||For his own treatment or for spouse, daughter, son, father or mother’s treatment. The patient should be hospitalised for more than a month.|
|In case of cancer, paralysis, TB, leprosy, mental derangement or heart ailment, advance can be availed without hospitalisation.|
|Home loan payment||Up to a maximum of 90 % from both employee’s contribution and employer contribution in EPF||10 years||The land must be in the name of the employee or spouse or jointly owned.|
|Related documents to the housing loan should be presented.|
|The accumulation in the employee’s PF account (or with the spouse), including the interest, should be more than Rs. 20,000.|
|Calamity||Up to 50% of the employee share.||N/A||Employer will have to provide the certificates of damage.|
|Addition/alternation of house||12 times of your wages||5 years||The land must be in the name of the employee/spouse or jointly owned.|
|The house should be constructed at least 5 years ago.|
|Lockout||Equal to your unpaid wages||N/A||Employer must not be getting wage for last two months or company must be closed for at least 15 days.|
|Withdrawal before the retirement||Up to 90% of accumulated balance with interest||57 years||For self only.|
NOTE: Following are some additional requirements that one needs to fulfill in order to file online claims for EPF withdrawal.
- You have activated the Universal Account Number (UAN).
- The mobile number used to activate the UAN should be active for receiving OTP (one time password).
- Your Aadhaar Card details should have been seeded in the EPFO database. Moreover, you should have availed OTP based facility for verifying eKYC from UIDAI while submitting the claim.
- Your bank account details and IFSC code should be seeded in the EPFO database.
- You should have also seeded your PAN number in EPFO database for PF final settlement claims in case your period of service is less than 5 years.
Documents Required for EPF Loan
Claim Forms are required to withdraw any sum from your EPF account. Following is a list of the EPF forms that can be used for the withdrawal:
- Form 19: It is required for the Final PF Settlement.
- Form 10-C: It is required for pension withdrawal benefit.
- Form 31: It is required for partial withdrawal (advance) of EPF in case of an emergency. It can be directly accessed from the Member Interface of EPFO Unified Portal.
Please note that no additional document is required to claim EPF loan/ advance. Submitting a duly filled Form 31 is sufficient for such partial withdrawals.
PF Loan Procedure
Following is the step by step procedure to file an online claim for EPF advance:
Step 1: Visit the Member Interface of EPFO website to login with your UAN and password.
Step 2: Go to “Manage” tab and verify your KYC details, including Aadhaar, PAN and bank account details.
Step 3: Go to the “Online Claims” tab and select “Claim (Form-31, 19 & 10C)” from the drop down menu.
Step 4: Member details will be displayed on the subsequent screen. Enter the last 4 digits of your bank account and click “Verify”.
Step 5: Sign the certificate of undertaking by clicking on “Yes”.
Step 6: Next click on “Proceed for Online Claim” and select the claim type from the tab “I Want to Apply for”. Furthermore, provide the purpose for claim, the required amount and the employee’s address.
Step 7: Generally, the amount is credited to your account within 15-20 days following the submission of the online request and employer’s approval.
EPF Loan Calculation
Let’s understand the calculations associated with EPF Advances with the help of the following example.
For instance: Mr. Kamal Nayak has applied for an EPF Advance due to the COVID-19 emergency.
The balance in his EPF account as on date is Rs. 1.5 lakh.
Sum of his monthly basic wage and dearness allowance is Rs. 15,000.
Thus, the amount for three months is Rs. 45000.
75% of balance of Rs. 1.5 lakh is Rs. 1.12 lakh.
Since, sum of 3 months’ basic wage and dearness allowance is lower than 75% of the EPF account balance, Mr. Nayak is eligible to get Rs. 45,500 as COVID-19 Emergency EPF Advance.
PF Loan Status – Check the Status of EPF Advance Claim
Step 1: Visit the EPFO website. Go to the “Services” tab and click “For Employees”.
Step 2: You will be redirected to the following page. Go to the “Services” section and click on “Know Your Claim Status”.
Step 3: Enter your UAN and password to login. Further provide your EPF account number, establishment code and state of your PF office to check the status of your claim.
Frequently Asked Questions (FAQs)
Q1. Is it compulsory to contribute to EPF?
Yes, it is compulsory to contribute to EPF for those who have a basic salary up to Rs. 15,000 if the individual is employed with an establishment with a workforce of over 20 individuals. For employees who are working in an establishment with less than 20 individuals, EPF enrollment is currently optional.
Q2. What are the various schemes under EPF?
There are three different schemes under EPF:
- Employees provident fund scheme: It is a saving scheme where an employee gets the complete accumulated balances when he retires (or even earlier in case of some specific events)
- Employees pension fund scheme: It is a monthly pension that is payable yo employees on their permanent disability or death
- Employees deposit linked insurance scheme: This scheme provides assurance benefit upon death of employee when in service
Q3. What would happen to the EPF if I change my job or quit it?
If you change your job, your PF balance can be transferred to the new employer. In such a case, the existing balance will be there and new contributions would be made by employer every month. And, if you quit your job, you can withdraw your EPF. All you need to do is to provide a declaration that you do not wish to work for the next 6 months.
Q4. Is it possible to check my EPF account statement online?
EPF account statement can be checked online by visiting the official website of EPFO. This facility is available only to those who are currently contributing to EPF.
Q5. Is it possible to withdraw only my voluntary contribution?
No, that is not possible.
Q6. Would there be any tax deduction if I withdraw my PF?
There will be no deduction if you have been employed continuously for 5 years (including period of past membership with previous employer/employees if the PF is transferred). Otherwise, deduction of tax will take place on the share that is contributed by the employer to the employees PF.
Q7. How often can I change my nomination?
You can change your nomination whenever you want.
Q8. Can an employee contribute to PF even after his retirement?
Yes, if the employee continues to work after reaching the superannuation age, he can contribute to PF.
Q9. During employment, can an employee discontinue his EPF account?
No, that is not possible.