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Ramalingam Kalirajan |8103 Answers |Ask -Follow

Mutual Funds, Financial Planning Expert - Answered on May 21, 2024

Ramalingam Kalirajan has over 23 years of experience in mutual funds and financial planning.
He has an MBA in finance from the University of Madras and is a certified financial planner.
He is the director and chief financial planner at Holistic Investment, a Chennai-based firm that offers financial planning and wealth management advice.... more

Question by Sayak on May 19, 2024Hindi

Can I withdraw PF for buying a resale property?

Ans: Understanding PF Withdrawal for Property Purchase
Your question about withdrawing Provident Fund (PF) for buying a resale property is important and relevant. Let's explore the possibilities and regulations regarding this process.

PF Withdrawal Rules for Property Purchase
The Employees' Provident Fund Organisation (EPFO) allows PF withdrawals for specific purposes, including the purchase of a property. However, certain conditions must be met to utilize this option.

Eligibility Criteria
Employment Tenure
You must have completed at least five years of service to be eligible for a PF withdrawal for purchasing a property.

Property Ownership
The property can be a house or flat and can be purchased individually or jointly with a spouse. The property must be in your or your spouse's name.

Amount of Withdrawal
Maximum Limit
You can withdraw up to 90% of your accumulated PF balance, including both employee and employer contributions, for purchasing a property. This amount includes the interest earned on your PF balance.

Purpose-Specific Regulations
Resale Property Purchase
The rules for buying a resale property are similar to those for purchasing a new property. The property must be free of any encumbrances, meaning it should not have any existing loans or legal disputes.

Documentation and Process
Application Submission
You need to submit Form 31 along with the required documents, such as a property agreement, identity proof, and a declaration form. These documents are necessary to verify your eligibility and the purpose of the withdrawal.

EPFO Approval
The EPFO will review your application and documents. Upon approval, the PF amount will be directly transferred to your bank account or to the seller as specified.

Tax Implications
Tax-Free Withdrawal
Withdrawals for purchasing a property are tax-free if you meet the eligibility criteria. However, if the PF account is less than five years old, the withdrawal amount may be subject to tax.

Strategic Considerations
Evaluating PF as a Funding Source
Withdrawing PF can be a strategic move if you need funds for purchasing a property. However, it reduces your retirement corpus. Carefully evaluate the impact on your long-term financial goals.

Alternative Financing Options
Consider other financing options like home loans. Home loans offer tax benefits on both principal repayment and interest payments under Sections 80C and 24(b) of the Income Tax Act.

Consulting a Certified Financial Planner
Consulting a Certified Financial Planner (CFP) can help you assess the best course of action. A CFP can provide personalized advice based on your financial situation, goals, and risk tolerance.

Conclusion
Withdrawing PF for purchasing a resale property is possible if you meet the EPFO's eligibility criteria. Ensure you understand the implications and explore all financing options. Consulting a CFP can provide valuable guidance in making an informed decision.

Best Regards,

K. Ramalingam, MBA, CFP,

Chief Financial Planner,

www.holisticinvestment.in

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