Can you Use your EPF Money to Buy a Home?
By Anupama Deshpande | December 24, 2019

Can you Use your EPF Money to Buy a Home? One can buy a house of EPF money, if he/she is a salaried employee and hold an EPF account. He can withdraw upto 90% of EPF amount.

It is a dream of almost every person to live in his/ her own house. For buying a home, you need funds. Most of the people buy their house by arranging the funds out of their savings and by availing home loan. If you are willing to take a home loan, you need to arange for margin money (down payment) which may be around 15% to 20% of the home loan amount. You must know that if you are a salaried employee then there is one more option available for you to arrange some funds for your home purchase or for making your down payment and that option open to you is EPF i.e. Provident Fund.

Related reading Lesser Known Facts about EPF

EPF account is opened by the employers in order to accumulate funds for the post retirement period of their employees. EPF account is credited every month by contributions of a small fraction of employee's salary as well as employer's contribution. Interest is also credited to this account on the balance of funds available in this account. As the salary increases, the contributions also increase.

The answer to the question can you use your EPF money to buy a home? is "Yes". You can arrange the funds to buy a house through withdrawing money from your EPF account, if you are a salaried employee and hold an EPF account.

Earlier, for withdrawing funds from your EPF account, you should have been an EPFO member for at least 5 years. Further, you were allowed to withdraw up to 36 months of basic salary plus dearness allowance for purchase or construction of house/flat and 24 months of basic salary and dearness allowance for purchase of land.

Related reading Withdrawal Rules for EPF

If you are willing to make use of your EPF money to buy a home, you must know latest norms associated with it. Outlined below are the broad norms associated with withdrawal of EPF money to buy a home:

• You should be a salaried emplyee holding a PF account with EPFO.
• You should be a member of EPFO for at least 3 years.
• The accumulation in your PF account including the interest should be more than Rs 20,000.
• You can withdraw up to 90% of your accumulation (employee's contributions, employer's contributions and interest) in the PF account or the cost of the property, whichever is lesser.
• You can withdraw the fund from your PF account for home purchase only once.

• You can also avail the interest payment subsidy on Pradhan Mantri Awas Yojana (PMAY) on the payments made through EPF for home buying.
• The house property cannot be purchased by you jointly with anybody else, except your spouse, if you are withdrawing from the provident fund account.
• You can also use your PF account for paying EMIs of home loan.
• It is better to compare the cost of funds (rate of home loan) and the rate of return offered on the EPF before taking the EPF partial withdrawal decision.

Related reading Steps to Transfer EPF Online

The main objective behind opening of a PF account is to save for long term and for retirement. In the absence of a regular source of income after retirement, most of the people depend on their PF savings.

Using PF funds for buying a home doesn't seem a right choice, in case you have other options of arranging the funds to buy home. The reason behind it is that it is a costly option. PF returns are tax free so the interest on PF account effectively yields higher returns. Further, if you go for a home loan and since the interest paid on a home loan and the principal repayment are also eligible for tax rebate so effectively there are lower payouts.

Nevertheless, those who have a backup plan to meet post-retirement fund needs through other investments or PPF account may consider this option of owning a home.