EPF Protocols: Partially withdraw EPF money to construct/purchase a house; hows and rules, explained

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Updated: July 18, 2018 1:37:30 PM

An employee can partially withdraw money from the EPF kitty for the construction or purchase of a house/flat. The member is required to have completed five years' membership of the EPFO. Rules explained in details below.

EPFO financial ExpressPartial withdrawal of EPF money is allowed for constructing a site or purchasing flat/house

EPFO recently allowed contributors to withdraw 75% of the EPF balance if they remain unemployed for a month. The latest rule allows a complete withdrawal of EPF money if a contributor is unemployed for more than 2 months. However, partial withdrawal of the EPF money is also allowed under the Employees Provident Fund Scheme, 1952.  

The Employees Provident Fund (EPF) is a part of the salary that is deducted each month to promote retirement saving habits in the country. The amount contributed to the fund is based on a fixed rate. The employees can earn a certain amount of interest in their EPF balance.

One of the conditions, when an employee can partially withdraw money from the EPF kitty, is for the construction of house or purchase of a dwelling house/flat. The member is required to have completed five years’ membership of the EPFO. The member’ share shall be at least Rs 1000. The amount shall be withdrawn if the title of the house is with the member or with the spouse. It means that the site under construction or the dwelling house/flat should be free from encumbrances.

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In a situation where the property or the site is mortgaged to obtain funds to purchase the flat/house or the construction site, such a dwelling house/flat shall not be deemed to be an encumbered property. land taken on lease for at least 30 years for construction or dwelling in a house or flat is not an encumbered property. For the purpose of purchase of a site for construction of a house, the lowest of the member’s basic wages and dearness allowances for twenty-four months or, the actual cost towards the acquisition of the dwelling site or, the sum of employer and employee contribution along with the interest amount accrued is taken into account. For acquiring ready built house/flat or for construction of a house/flat, the withdrawal shall not exceed the member’s basic wages and dearness allowance for thirty-six months or, the total cost of the construction, or the sum of member’s and employer’s share of contributions with interest thereon.

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The withdrawal is not allowed in case of purchasing a share in a joint property or for constructing a house on a site owned jointly. However, withdrawal is allowed if the site is owned jointly with the spouse. The withdrawal amount shall be made directly to the agency, in one or more instalments, from which the flat/house is purchased. Withdrawal is allowed in instalments as sanctioned in case of construction.

Another condition binds the drawee to commence the construction within 12 months of the withdrawal of the first instalments and shall be completed within 12 months of the withdrawal from the final instalment. Also, an additional withdrawal of 12 months of basic wages and dearness allowances or member’s share in the contribution with interest whichever is less is allowed. It is granted for undertaking substantial alterations and improvements.  

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Another avenue where an EPFO member can withdraw money for construction of house or purchase of a dwelling house/flat including a flat in a building jointly owned with others when purchase or construction is from the Central government, state government or a housing agency under a housing scheme. The member is required to have completed five years’ membership of the EPFO.

These payments are allowed at the option of the member by the postal money order, or, by deposit in the payee’s bank account, in a scheduled or co-operative bank or through the employer.

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