How To Use Your Provident Fund To Finance A Home Purchase

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provident fund to financeProvident fund if an essential facility or security provided t the employees by a company. In this regard, a very small percentage of the salary is deducted and deposited in the employer’s provident fund account. But, it can now be used to manage expenses in liaison with home improvement, purchasing a property or even constructing a house on the plot. Though, a person has to abide by specific conditions and limits laid by the provident fund department. After completing essential formalities, one can withdraw from the balance of provident fund account.

When it comes to the matter of identifying the formalities associated with the withdrawal of provident fund, an employee is required to contribute to the fund for a minimum time period of 5 years. Only such employees are allowed to withdraw funds for buying a plot or constructing a house. In fact, the rule states that money can be withdrawn by the spouse of the employee or both together. Taking note of the money to be withdrawn, it depends on the purpose for which it needs to be utilized. In order to buy a plot, the amount should include 24 months basic salary and dearness allowance. In any case, the withdrawal money should not exceed the cost of the plot for sure.

In the matter of buying a house or develop residential property on a plot, the withdrawal facility extends to a basic salary of 36 months and dearness allowance. It should be noted that the withdrawal is permitted by the spouse and the employee only with purchase of the house made by both. No one else is allowed to purchase home except the couple. When it comes to the matter of withdrawing money from the provident fund for the purpose of constructing a house, the work needs to start within 6 months and completed within a span of one year from the last installment of withdrawal.

Besides being a regular employee contributing to Provident Fund, the members of co-operative society or a registered housing society depositing money in their PF can go ahead with the withdrawal facility. Certainly, the approval of the government agencies handling provident fund is mandatory for withdrawal. Of course, one has to be careful about the fact that a maximum of 90 percent of the total amount in PF can be withdrawn. Still, it is the cost of the asset that can play an important role in deciding the amount of withdrawal from the PF.

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