In exchange for an employee’s dedication and hard work, the employer contributes to their retirement fund via their EPF account — a worker’s monthly contributions to the EPF equal 12% of their dearness allowance plus basic income. A total of 12% comes from both the company and the employee. Employees may also take out loans from their PF account at an interest rate of 8.25% on the corpus.
Even though employees may only access their EPF funds after retirement, they can still receive a part of their funds in case of an emergency, as long as they meet specific conditions. That form of withdrawal is referred to as an EPF loan. When is the best time to apply for a loan from the EPF? In this blog article, we will discuss that topic and more!
What is EPF loan?
The Employee Provident Fund (EPF) is a retirement benefits scheme that the Indian government has established for salaried workers. This scheme allows eligible employees to deposit a portion of their monthly base salary into a PF (Provident Fund) account.
Workers might obtain a personal loan by withdrawing a lump sum from their PF accounts. Despite the loan-sounding name, this is not your typical personal loan, where you must repay both the principal and interest. Repayment is not necessary for PF loans since they are non-refundable.
Employees can only access their savings when the Employer’s Provident Fund Organization (EPFO) has verified the reason for the withdrawal. Loans from PF accounts are often available to employees with five years of service or longer. This criterion’s applicability depends on the PF loan application’s intended use.
EPF Loan Interest Rate
You may get out of an EPF personal loan early, and they won’t want you to pay it back as a PPF loan would. That’s one way they vary from each other. So, it doesn’t come with an EPF loan interest rate. The interest you would have earned on the principle if you hadn’t withdrawn the money is proportionate to your repayment obligation. As of fiscal year 2023–24, the EPF loan interest rate is 8.25%, calculated by adding up the monthly running balance.
Step-by-step Procedure to Claim COVID-19 EPF Emergency Advance
The EPFO has inserted a one-of-a-kind provision in the EPF Act to provide a non-refundable COVID-19 emergency advance. As a result, EPF members will be able to keep their funds liquid and their cash flow steady, notwithstanding the coronavirus pandemic and shutdown.
All EPF members employed by factories or other businesses in a certain location will be eligible for the COVID-19 Emergency Advance if that area is confirmed to be impacted by the epidemic. All employees in India may now get the EPF advance due to the announcement of the COVID-19 epidemic.
To prepare for a COVID-19 emergency, you will require the following:
- You may use this benefit without providing any paperwork or credentials, either as an employer or an employee.
- Three months’ income + dearness allowance or 75% of the money in your EPF account, whichever is smaller, is the amount that cannot be reimbursed from the COVID-19 emergency advance.
- Since the withdrawal is non-refundable, you are not obligated to repay the money and interest is also waived.
You may get the EPF emergency advance by filling out an online claim form, provided that your UAN is validated with Aadhaar and your bank account’s KYC. Linking your mobile device to your UAN is an essential step in the withdrawal process. The exact steps to do the same thing are:
- Do EPF loan login with the help of the Member Interface of the EPFO Unified Portal using your Member ID and password.
- Start by hovering over the “Online Services” sub-option and choosing “Claim.”
- Enter the last 4 digits to match with your bank record.
- Go to the “Proceed for Online Claim” button and click on OK.
- Select the PF Form 31 prompt from the menu.
- Set the goal to”Pandemic outbreak (COVID-19)”.
- Provide your address and also a scanned check in the requirement.
- Enter a One-Time Password (OTP) to confirm your transaction.
You may also use the UMANG app to request an emergency advance. To submit a praise claim, go to “Home,” then “EPFO,” “Employee Centric Services,” and lastly, “Praise Claim.” Claim submission requires using your UAN and the OTP issued to your mobile phone.
EPF Loan Eligibility Calculation
An employee is only eligible for an EPF loan apply online in the following cases:
1. Home construction or purchase
- At least five years of service are required of the employee.
- A worker may take out a loan equal to 24 times their monthly earnings for a house purchase or 36 times their salary for a home purchase and construction, whichever is higher.
- In this case, only the account holder or spouse may seek EPF withdrawal for home loan.
2. Getting a mortgage back
- For this person, three years of steady work is required.
- Ninety per cent of the EPF corpus is available to you as a part of the EPF loan limit.
- In this case, only the account holder or their spouse may seek a withdrawal from the EPF.
3. Medical care
- No time restriction on employment is imposed when EPF funds are used for medical treatment.
- Your withdrawal amount may be six times your monthly income plus interest or the employee’s share, whichever is lower.
- Withdrawals may be requested by anybody having an EPF account, including the account holder’s parents, spouse, or children.
4. Wedding
- Employees must have at least seven years of continuous service.
- Half of the employee’s contribution plus interest is available for withdrawal as a part of the EPF loan limit.
- Any account holder’s immediate family member, including children and siblings, can make a withdrawal request.
5. Acquiring expertise
- Withdrawals from an employee’s EPFO contribution cannot exceed 50%.
- The EPFO member must have worked for the organisation for at least seven years.
- Children of employees are eligible to apply for and receive an EPF loan to help cover higher education costs.
6. Industrial Discrimination
- Employees may be qualified to apply for an EPF loan if their employer has been inactive for fifteen days or more or has gone two months without payment.
- It is up to the employee to decide whether to accept the whole amount or only a part, equal to their overdue wages.
- If the company has remained dormant for more than six months, the employer and employee may be eligible to have their payments reimbursed.
7. Retirement
One year before retirement or at the age of 54, whichever occurs first, an employee is allowed to withdraw up to 90% of their EPF balance.
Documents Required for EPF Loan
You need to fill out a claim form to access the money in your EPF account. You may get money from your EPF account in a few different ways:
- Filling out Form 19 is necessary to finalise the PF settlement.
- You need to complete Form 10-C to receive a pension withdrawal benefit.
- You may advance (partially withdraw) your EPF funds by completing Form 31 in the case of an emergency. The Member Interface of the EPFO Unified Portal makes it easily accessible.
- Applying for a loan or advance from the EPF does not need gathering any additional papers. Submitting a correctly filled out Form 31 will allow you to achieve these partial withdrawals.
PF Loan Procedure
For EPF loan apply, complete these steps:
- Get your User ID and Password from the EPFO Member Interface on their website.
- The next step involves verifying your Aadhaar, PAN, and bank details on the Know Your Customer part of the “Manage” page.
- Third, locate the “Claim (Form-31, 19, 10C & 10D)” drop-down option in the “Online Services” area.
- You’ll see the member’s details on the screen that follows. Find the “Verify” area at the bottom of the page and enter your bank details there.
- Next, choose “Yes” from the drop-down menu when asked to sign the undertaking certificate.
- Click the “Proceed for Online Claim” button to choose the kind of claim you want to apply for. To complete the claim, please provide the employee’s address, the amount required, and the reason for the claim. Additionally, please include a scanned copy of your check or passbook.
- After your firm authorises your online request, the funds should be delivered to your account within fifteen to twenty days.
EPF Loan Calculation
The authorised loan amount for you may be readily determined. An example will be used to clarify this point. Take Miss Sarita, for instance; she has applied for a COVID-19 Emergency Advance. There are now Rs.2.5 lakhs in her PF account. With her new DA and basic income, her monthly take-home pay is 25,000. The total for the three months would be 75,000. Using 75% of 2.5 lakh INR, we can obtain INR 187,500.
Miss Savita can acquire a COVID-19 Emergency Advance loan of INR 75,000 since her DA and basic income do not exceed 75% of her PF balance.
Check the Status of EPF Advance Claim
To check the EPF loan status, complete these steps:
- Get to the EPFO’s website.
- Go to “Services” and then choose “For Employees.”
- A new window will pop up, and you may access this URL. Afterwards, choose “Services” and last, “Know your claim status” from the appearing menu.
- Now, you may log in using your UAN and password. In addition to the establishment code and your PF account number, you must also know where your PF office is.
You will get to know the status of your EPF Advance claim.
FAQ’s:-
Yes, you can check it online by visiting the official EPFO portal. However, you can access this feature only if you are still contributing to your PF account.
When a PF is transferred, no deduction will be made if you have worked continuously for five years. This includes any time you were a member of your previous employer or workers. Employers may claim their PF contributions as a business expense unless otherwise stated.