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4/19/2019

Why is EPF account balance a safer and convenient option for buying a property in India?

You work hard for years and save a lot of money to secure your life with certain significant assets like a home. But what if you face a shortage of money while planning to turn your dream into reality? With the rise in property prices, you may have to face a lack of funds. 

In such a situation, your EPF (Employee’s Provident Fund) has the solution to keep you safe. For those who don't know or have a vague idea, Employee’s Provident Fund is a retirement benefits scheme for salaried employees. It is governed by the Ministry of Labour and Employment, Government of India. The general procedure is to receive the EPF amount after retirement from the job. However, there's another fact related to EPF. You can withdraw 90% of your EPF balance to buy a property in India.

The new scheme in EPF started on 12th April 2017. The new scheme allows every member of the Employee’s Provident Scheme to withdraw 90% of his/her EPF balance for purchasing a house. There are other benefits that EPF provides while buying a home such as an amount withdrawn from the EPF balance consists of both employee and employer contribution along with interest received on the total balance in the account. The received money can be used for purposes like purchasing a house, construction of a house, or buying a piece of land. Also, the money received will be directly paid to the seller of the property - central government, state government, co-operative society, or a private builder (Registered under LBP).

Isn't it a wise choice to withdraw the money from your EPF account to fulfil your dreams? Not just buying a new property, you can use the EPF amount for repaying the outstanding balance of your home loan as well. One important condition that you should be aware of is the minimum balance required in your EPF account. You should have at least ₹ 20,000 in your EPF account to withdraw money from it. The procedure to withdraw your money is to first ask for the PF account number along with the EPF member’s name, EPF balance, and the details of the PF account from the EPFO commissioner by writing an application. 

Once approved by the commissioner, a certificate is issued containing all the required information to the housing society or bank, mentioned in your application. Remember, it is mandatory to reveal the PF balance in the application. Then, submit the certificate to the authority, registered builder, housing agency, etc., and EPFO (Employees' Provident Fund Organisation) will directly pay the amount to them.

There are specific eligibility criteria that you must meet to take the balance for buying your home:

•       You must be an active member of EPF scheme for at least five years to qualify for withdrawal.

•       Only through a registered society, you can purchase a plot or construct a house with the withdrawn money.

•       If you wish to buy a house or plot jointly with your spouse, he/she should also be a member of the EPF scheme.

•       Choosing a secondary market from any individual is a wrong idea to use the withdrawn money for purchasing a house.

•       Withdrawing money for more than one time is not allowed.

•       The amount to be withdrawn cannot exceed your 24 month’s basic salary and dearness allowance (DA). The maximum amount is limited to the cost of the plot that you are planning to buy.

•       On the other hand, the limit gets upraised to 36 months of your basic salary and DA in the case of purchasing or constructing a house.

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