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Can I withdraw EPF to repay home loan principal?

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In short

Members generally need 10 years of service to settle an existing loan, though first-time buyers or housing society members can access up to 90% of their balance after three years. To qualify, the financed property must be registered in the name of the member, their spouse, or jointly. Additionally, withdrawals become completely tax-free only after completing five years of continuous service.

Key points

  • The underlying real estate must be registered in the name of the member, spouse, or held…: The underlying real estate must be registered in the name of the member, spouse, or held jointly.
  • Inactive accounts continue to generate taxable interest for up to 36 months following the…: Inactive accounts continue to generate taxable interest for up to 36 months following the final contribution date.
  • Reducing mortgage principal provides interest savings but diminishes the long-term compou…: Reducing mortgage principal provides interest savings but diminishes the long-term compounding growth of the retirement corpus.

Sources checked by our analysis pipeline: 1

These are a set of queries raised by ET Wealth readers, which have been answered by our panel of experts.

Can I withdraw my Provident Fund to repay my home loan principal? Will I have to pay taxes on PF withdrawal?

Rushabh Desai, Founder, Rupee With Rushabh Investment Services: You can withdraw your Employees’ Provident Fund (EPF) to repay your home loan principal. To repay an existing housing loan, you need 10 years of total EPF membership. However, recent provisions allow housing society members or first-time buyers to withdraw up to 90% of their corpus for housing purposes after three years of service.

The property must be registered in your name, your spouse’s name, or jointly owned. Whether you owe taxes depends on the five-year rule of continuous service across all employers. Over five years, the withdrawal is tax-free, and no Tax Deducted at Source (TDS) is applicable. Under five years,the withdrawn amount is treated as taxable income. Additionally, a 10% TDS will be deducted if the withdrawal amount exceeds Rs 50,000.

Using your PF to lower the principal saves…

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