PF member’s home, A link to security and Stability
Whether it’s comfort or security, for most people, a home is a critical milestone. For these employees employed in India, the Provident Fund (PF) offers an once-in-a-lifetime opportunity to plan for their future and fulfill their long cherished dream of owning a house. In this article we will share how a PF member can take advantage of this system to own a home.
What is Provident Fund (PF)?
The Provident Fund is a retirement savings scheme, which is largely managed by the Employees’ Provident Fund Organization (EPFO) in India. This is a compulsory saving deducted from the employee’s and employer’s paid salary every month for the employee’s future. The money in the PF account accumulates along with interest and is mostly utilised after retirement. But the PF scheme has provisions where employees can withdraw money in an emergency – for instance health or education needs or even home-related money.
PF on the Homestead: What PF Means for Owning a Home
You are creating an excellent amount for your retirement being a PF member. But did you ever wonder loans can also be availed against the money lying in your PF account for the purpose of buying a house? This is something that the PF system can address as an intermediate step for owning a property.
- Home Loan Down Payment
PF accounts are meant for retirement, not home expenses. One of the popular options to withdraw PF savings is for the down payment on a home loan. Most of the PF members use the balance amount in their accounts for the payment while purchasing a house or an apartment. This doesn’t just minimize the amount of the loan, but it reduces the amount of interest paid over the term of the loan.
- Partial Withdrawal on home construction or purchase
If you’re building a house, or purchasing one, the EPFO allows you to withdraw some of your PF savings. This is a facility provided after some services (generally 5 years). A partial withdrawal could help you with a deposit for a land purchase or property purchase, making it easier for you to own a home without having to borrow too much.
- Repayment of Home Loan
One very huge advantage of being a PF member is that one can leverage the corpus in the PF to repay a home loan. You might be eligible to withdraw a portion of your PF for pre-closing a home loan after contributing to your PF for a few years. This can allow you to pay less in interest and pay off your home loan more quickly.
- Tax Benefits
There are also some tax benefits if you own house from PF contributions. Investment to the PF account it is under the provision of section 80C of the Income Tax Act where by the tax payable on the net income is reduced i.e. the tax burden of the individual is less than it would have been if the Savings were not made to the PF account. Also, the interest on a home loan, if you are paying it, is also deductible under Section 24(b).
Challenges and Considerations
Though the use of the PF money for buying/ building house is very beneficial, but there are some rules for that. Note:*_ You will be able to make a partial withdrawal from PF account only after completing 5 years of continuous service._ Also, the quantum of withdrawal which you can make on such loans would depend on the type of the property which is proposed to be purchased or constructed, and the EPFO has prescribed limits for such withdrawals.
Conclusion
Membership at PF is about more than simply saving for retirement, but also an important instrument to achieve one of life’s greatest dreams — owning a home. With the help of different provisions offered on the PF account, you can make sure that your dream home is no longer a far-fetched dream while you ensure your long term financial security. Be it utilising your PF balances towards down payment, partial withdrawals for property purchases or paying back your home loan, the Provident Fund can aid largely in your home owning journey. Don’t forget to monitor the rules and regulations on this set by EPFO to ensure you can use your PF savings well in buying a house.
