Employee Provident Fund (PF) amount is deducted from salary every month, but can this amount be used to repay the principal amount of home loan? Is there any tax to be paid on PF withdrawal? Some such questions come to mind. In such a situation, Rishabh Desai, Founder, Rishabh Investment Services, said that you can withdraw money from your Employees Provident Fund (EPF) to repay the principal amount of your home loan. To repay the existing housing loan, you will need to subscribe to EPF for a total of 10 years. However, under the latest rules, housing society members or first-time home buyers can withdraw up to 90 per cent of their deposit for housing purposes after three years of service. When is tax levied and when is it not? Understand As per media reports, the property should be registered in your name, your spouse's name or in joint ownership. Whether you have to pay tax or not depends on the rule of five years of continuous service. The amount withdrawn after more than five years is tax-free and no TDS is applicable on it. Amount withdrawn after less than five years is considered taxable income. Additionally, if the amount withdrawn exceeds Rs 50,000, 10% TDS will be deducted. If your home loan interest rate is higher than the EPF interest rate, using your EPF to reduce the principal amount can save you money. Keep in mind that since you're withdrawing money from a retirement fund, you'll miss out on the benefits of tax-free compound interest that accrues over decades. How long will the interest continue? Suppose, a person retires from service at the age of 56 years in April 2024 and after that contribution to EPF stops. Second, the amount has not been withdrawn from the EPF account yet, because it offers higher interest compared to other savings schemes. In such a situation, for how long can the person keep the amount in the EPF account? Will interest continue to be received? Vikas Jain, co-founder of Share Samajan, says that interest on your EPF account does not automatically stop after you turn 58 years of age. As per the applicable rules of EPFO, your account continues to earn interest for 36 months (i.e. till approximately April 2027) from the date of last contribution in April 2024. After that, the account stops earning interest. However, the deposited amount remains yours and you can access it at any time. The interest received on your EPF balance after leaving the job is taxable. To facilitate the withdrawal process, you should keep your bank account details and updated KYC details with you. It would be advisable to withdraw the deposit before the completion of the three-year period, because keeping the money after this period will not provide any additional benefit.
