To give boost to “Housing for all” scheme, the Government has tweaked the rules pertaining to employees’ Provident fund scheme by enabling the individuals to pay equated monthly installments (EMI) of home loans through EPF.
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The contributory employees of the provident fund can use 90% of the EPF accumulation to make down payment for buying a house and use their accounts for paying EMIs on a home loan.
As per the new rules of EPFO, PF members can withdraw funds in his individual capacity, if he does not want to be a member of a housing society, provided all the requisite documents are in place. Since the previous rules prevail, he can still withdraw funds for purchasing a house.
This scheme is available for only those members who have completed 3 years as a PF member. The provident funds can be used for an outright purchase, as a down payment for a home loan, for buying plots, for the construction of a house. The transaction can be made through central government, state government and even from a private builder, promoters or developers.
No secondary market deals:
As per the new rules of EPFO, there will be no secondary market or resale transactions of real estate properties. The payment will be made directly to the co-operative society, state government, central government, or any housing agency under any housing scheme, or any promoter or builder, in one or more installments by the EPFO.
How much amount can be withdrawn:
A PF member can withdraw up to 90% of the balance in the PF account or the cost of the acquisition of the property, whichever is less. The member’s share of contribution plus interest and the employer’s share of contribution plus interest will be included in the balance. If the construction of a house happens at a lower cost or the member doesn’t get an allotment of the house, the amount has to be refunded back to the EPFO within 30 days.
Use PF to make EMI payment:
If a Provident fund member is also a member of any housing society, then he can pay the part of full EMI on a loan by using the PF. The EMI will be directly paid by the EPFO to the government, housing agency or the bank.
How to apply for availing the EPF?
If a PF member becomes a member of a housing society, then he or she can apply individually or jointly through housing society by filling an application form to obtain the certificate from the EPFO. In the application form, the employees ask for the balance and the deposits made in the last three months before applying. Through this the EPFO can determine how much EMI can be availed by the employee.
For getting the certificate the employee has to mention the name and details of the bank or the housing society to whom such certificate is to be issued.
After receiving the application form, the EPFO issues a certificate in a prescribed format which shows the outstanding balance and the last three month’s deposit in the account.
In case, if a member wants to use the PF money to meet EMI’s, then an authorization form is to be filled with the application form by the member in a prescribed format. The authorization form will include details such as PF amount, PF and loan account number, lender name, address, etc.
Conditions of EPF in case an employee leaves the job:
In case of default, the EPFO has made it clear that under such circumstances the payment will not be made to the lender. EPFO will not stand party to any agreement between member and society or builder. If an employee leaves the service, then the member has to repay the loan and if the PF get over, the employee have to arrange the funds on his own to meet the future EMIs.
Existing rules of EPF for house purchase:
If an employee wants to use his PF for the purchase of a house from a builder.
Minimum membership period of the employee should be 5 years.
Maximum amount that one can withdraw from a PF account is 36 month’s basic wages or the total of employee and employer share with interest or total cost.
The employee doesn’t need to be a member of housing scheme to avail it.