EPF or Employee Provident Fund is a retirement benefits scheme under which every employee must contribute 12% of the basic pay into the EPF fund. The EPF fund is maintained by the Employee Provident Fund Organisation of India (EPFO). Under this scheme, the fixed-rate of 12% is also contributed equally by the employer. While the employee can withdraw the amount saved in the EPF funds after retirement, the same can also be withdrawn in case of financial contingencies. However, to withdraw funds, the employee needs to fulfil specific eligibility criteria.

What is EPF Loan?

The partial portion of the EPF fund that can be withdrawn in case of a financial emergency such as home repair, education, home loan repayment, lockdown as an advance is known as EPF loan. 

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The process to avail an EPF Loan

The employee needs to submit EPF Loan Form-31, 19 & 10C and the reasons for the same needs to be approved by EPFO to avail an EPF loan.

Conditions under which employees can avail an EPF Loan:

1. Illness: The EPF loan can be availed for medical treatment in the following circumstances:

• The employees can withdraw for the treatment of themselves, their spouse or their children.
• EPF loan can be availed up to 6 times of their basic monthly salary or the total share of the employee’s plus Interest, whichever is lower from the EPF account.
• There is no requirement for a minimum service period.

2. Education: To avail EPF loan for education, an employee needs to meet the following eligibility criteria.

• Employees can withdraw upto 50% of the funds contributed by them in EPF accounts.
• The funds can be withdrawn for the education of account holders, or the education of their children post matriculation.
• Employees can avail the EPF loan if they have provided their services for seven years.

3. Marriage: EPF loan can also be withdrawn for the requirement of funds for a wedding provided the employees to fulfil the following eligibility criteria:

•  You can withdraw up to 50% of their share of funds.
• The EPF account must have been opened for seven years to avail EPF loan.
• The funds can only be utilised for the wedding of self, their children or brother and sister.

4. Purchasing Land: Employees can also utilise EPF funds for purchasing land, and the same can be taken as an advance only in the following circumstances:

• EPF funds can be withdrawn up to 24 times of basic monthly salary plus dearness allowance for purchasing land.
• In case of withdrawal of funds for the home, you can withdraw 36 times of basic monthly salary plus dearness allowance.

5. Others: EPF loan may also be approved if the employees fulfil the following the eligibility criteria:

• The employees can withdraw 90% of the total corpus along with Interest if they have reached the age of 54 years.
• An advance up to the sum of 3 months’ wages and dearness allowance or up to 75% of the EPF account balance, whichever is less can also be availed to cope up with the COVID 19 emergency.

Conclusion: EPF loan may be an excellent option to avail funds in the case of a financial emergency, and the same also needs to be paid. However, it is advisable to avail these loans when you don’t have another alternative, and the same money can be used for the retirement savings.