Can I withdraw my EPF to repay home loan principal; will I have to pay tax on it?

These are a set of queries raised by ET Wealth readers, which have been answered by our panel of experts.

Can I withdraw my Provident Fund to repay my home loan principal? Will I have to pay taxes on PF withdrawal?

Rushabh Desai, Founder, Rupee With Rushabh Investment Services: You can withdraw your Employees’ Provident Fund (EPF) to repay your home loan principal. To repay an existing housing loan, you need 10 years of total EPF membership. However, recent provisions allow housing society members or first-time buyers to withdraw up to 90% of their corpus for housing purposes after three years of service.


The property must be registered in your name, your spouse’s name, or jointly owned. Whether you owe taxes depends on the five-year rule of continuous service across all employers. Over five years, the withdrawal is tax-free, and no Tax Deducted at Source (TDS) is applicable. Under five years,the withdrawn amount is treated as taxable income. Additionally, a 10% TDS will be deducted if the withdrawal amount exceeds Rs 50,000.

Using your PF to lower the principal saves you money if your home loan interest rate is higher than the EPF interest rate. However, because you are withdrawing from a retirement pool, you lose out on decades of tax-free compound interest.

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I retired from service at the age of 56 in April 2024, and my EPF contributions stopped thereafter. I have not yet withdrawn my EPF balance as it earns a higher interest rate than other savings schemes. How long can I retain the money in my EPF account and continue earning interest—up to three years from the date of my last contribution or until I turn 58?

Vikash Jain Co-founder, Share Samadhan: Interest on your EPF balance does not automatically stop when you turn 58. Under the applicable EPFO rules, your account continues to earn interest for 36 months from the date of your last contribution in April 2024, which means roughly until April 2027. Thereafter, the account stops earning interest, although the accumulated balance remains yours and can be claimed at any time.

The interest earned on your EPF balance after leaving employment is taxable. You should maintain updated KYC details, including your bank account information, to ensure a smooth withdrawal process. It would be advisable to withdraw the accumulated balance before the three-year period ends, as retaining the funds beyond this period will not generate additional returns.

Our panel of experts will answer questions related to any aspect of personal finance. If you have a query, mail it to us right away. Email ID: etwealth@timesgroup.com