EPF stands for “Employee Provident Fund”. It is one of the government-instruments that serve as a long-term savings or pension plan for all working professionals in India. Any company that hires more than 10 people has to register with Employee Provident Fund Organization (EPFO) as one of the mandates by the Indian government. EPF is a mandatory deduction for all these working professionals earning less than INR 6,500 but people making more than that amount monthly can opt out of EPF schemes. A total of 24% of a salaried employee’s basic pay goes towards EPF each month (12% employee and 12% employer-contribution).
It is possible to borrow from an individual’s EPF corpus, although not highly recommended, to make use of the money for buying or repairing house, bearing emergency medical expenses, education of children etc. But the scenario has changed a bit since the beginning of this year. Employee Provident Fund Organization (EPFO) has come up with a housing scheme to empower members by allowing them to create cooperative housing societies. Such societies can now utilize the 90% of their provident fund corpus for purchasing land, constructing houses or for loan repayments. The proposal is aimed at helping out about 4 crore members of the EPFO.
As per EPFO’s new proposed plan to the Labour Ministry, the following is to be added – ““68BD paragraph (a group housing scheme) to enable EPF members to form a cooperative society consisting of a minimum of 10 employees that may be provided with not only a single time EPF withdrawal but even an option to repay their loan instalments to banks on a monthly basis using the Employees’ Provident Fund Scheme, 1952.”
The eligibility limitations kick in if a member has held the EPF account for less than 3 years. That is one of the eligibility criteria. All the employees who have held the EPF accounts for a minimum of 3 years are allowed to avail the benefits of this new service proposed by the government.
V.P Joy, the EPFO Central Provident Fund Commissioner, maintains that the current EPF scheme is not being used properly to pull money for buying land or constructing houses. Hence, the new proposal has been put forward.
The Present Scenario:
At present, the eligibility criteria for withdrawing from EPF account is quite strict. One must have held the EPF for at least 5 years to avail the funds worth of 36 months of member’s salary for constructing a flat or a 24 months’ worth of salary for buying land. In case of availing a housing loan, an equivalent to a salary of 36 months, one must have held EPF for a minimum of 10 years. To make the matters more difficult, the EPFO is mandated to notifying and approving the housing agencies. These agencies, then, are allowed to help build houses or buy land.
But the proposed scheme is aimed at bringing about some relief to members in this regard. The cooperative societies formed by EPF members will be able to pick the housing agencies of their choice and liking. EPFO plans to tie-up with banks and financial setups to offer cheaper housing loans to the members.