PF withdrawal for site loan repayment.

POSTED BY Kalyan A ON June 26, 2012 4:35 pm COMMENTS (5)


I am in a confusing situation for PF withdrawal and needs some help. I have total of 12yrs 6 months exp but in the current company I served for 4yrs 3 months and moving on to new company next month. I have surplus of 10L plus in PF account. I also have a site loan (SBI MaxiGain) running with -20L balance. I have taken 1.5 yrs ago and for my site alone. I soon should start my house construction with additional loan. So, I want to either close the site lone or construct the house using PF money.

Is it recommended to close the loan but pay tax on PF? I am under 30% tax slab. Is it better to wait for another 9 months (by transferring to new company) or close the loan and save the site/plot loan interest. The current company’s PF trust is owned by private entity and my new company uses government’s trust. My friends had bitter experiences with government PF trusts as they do not act in time and also bargain for commissions. So, I am worried to move my money there.
Also, is there any mandate to construct a house in 2 years as I had taken a site loan (for 10 yrs) with MaxiGain? If not, I can also opt for PF transfer.

Sorry for too many questions.

Any help greatly appreciated.

Thanks & Regards

5 replies on this article “PF withdrawal for site loan repayment.”

  1. Kalyan A says:

    Hi Ashal & Manish,

    thank you very much for taking your time. It is very useful info.


  2. Kalyan

    as Ashal said ,that 5 yrs thing is combined tenure , so if you work for 2 yrs in one company and transfer the EPF to another company where you work for next 3 yrs, then your EPF completes 5 yrs and now you can withdraw without paying tax .

    IN your situation , I think if your situation really hard presses you for funds , better take the EPF now and if required pay the tax also , nothing more than your situation . You can earn the “tax paid” amount later in life 😉 . Let the house start building !

  3. Dear Kalyan, from the above query, there is a good news for you. You were in service continuously, although not with same employer but with different employer. So the amount received by you from employer 3 against your PF is non taxable (including employer-1).



  4. Kalyan A says:

    Hi Ashal,

    Thanks for the reply.
    Complete loan for house construction adds too much of EMI overhead on me. EMI comes to around 80 k (30k for site + 50 k for construction) at the current interest rate. So, I want to bring it down by either taking less house construction loan or repay existing site loan. My current site is loan at 9% and it goes to floating after 1.5 years.

    Today I learned that, my company is forcing me to submit a Form-19 and if I do not get transfer of PF in 90 days, they will automatically withdraw and pay to my savings account.
    If I transfer PF to new company, I think the same 5 years lock in troubles me again after 9 months.

    In case of withdrawal, how do I calculate the taxable income and where to declare while filing? I have changed two companies in last 5 years. Here is my stay in various companies till now.
    Company 1 – 7 years 5 months (PF transferred to company 3)
    Company 2 – 8 months (PF remains with government/regional PF trust).
    Company 3 – 4 years 3 months (Company 1+Company 3 PF resides in private trust)
    Company 4 – yet to join (the PF is maintained by regional PF trust)

    So, how do I calculate the taxable income and tax? I am worried if I have to pay tax for entire PF amount including company 1’s PF. This seems to be unfair law.

    Thanks & Regards

  5. Dear Kalyan, why you are not going for higher loan from SBI itself for construction? Regarding PF withdraw, please wait for 9 months i.e. till april 2013 to withdraw from your old PF no matter you are working there or not.



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