When we start to earn money, many of us get a provident fund (PF) account that we only associate with savings that can be withdrawn at a later stage. But these savings can help fund many transactions associated with a home.
Using PF for purchase or construction of a house
After five years of having a PF account, one can withdraw money for constructing a house, purchasing a plot or a house. The only criterion is that the amount of loan taken should be for a home in your or your spouse’s name. Depending on the purpose for which the loan is taken, the amount shall vary. For instance, if it is for purchase of a plot of land, the loan will be restricted your dearness allowance and basic salary of 24 months.
It is further subjected to the cost of the land or the maximum in your PF account, whichever is lower. Loan for construction of a house or purchase can be for 36 months subject to PF account balance and dearness allowance or the cost of the house, whichever is lower.
When it comes to withdrawal from the PF account, the property can only be purchased jointly with a spouse and not anybody else. In case the withdrawal is permitted from a PF account, the construction should start within first six months and should be completed within 12 months.
But in case of the purchase of a house which has already been completed, the process should be finished within six months of the withdrawal date. Depending on the convenience of the individual, the withdrawals can be one-time or at regular periods.
Using PF for renovation/addition of a house in your or your spouse’s name
First and foremost condition for withdrawal from PF on account of renovation or addition or any kind of improvement to a home is that the property should be in one’s own name or in the spouse’s name.
Except such instances, the withdrawals are not permitted. This withdrawal is only applicable after five years of a house being built. It is not necessary that a withdrawal for purchase or construction was previously done on the PF account for the same home.
The permitted withdrawal is 12 months dearness allowance and basic salary. The cost of renovation or the PF share of the interest accruing to the employee, whichever is lower is provided.
But another withdrawal for the same purpose of renovation can only be done after 10 years considering the same factors.
Using PF to pay advance on housing loans
The withdrawal on PF account for paying off the balance on housing loans can be done if the house is in the name of the individual or the spouse or members of the family. The advance payment is restricted to 36 months of dearness allowance and basic salary.
The lenders in such cases can be authorised and recognised institutions such as nationalised banks, Central Government and state governments, municipal corporations, co-operatives societies, development authority, public finance institutions and state housing board, among others.