EPF Withdrawal for Debt Repayment: A Risky Move for Long-Term Security?

• Salaried individuals often consider using EPF funds to repay home loans, seeking immediate relief from EMIs.
• Financial experts warn that while attractive, this can diminish long-term financial security as EPF is a tax-free retirement instrument with 8.25% annual interest.
• Home loans become easier to manage over time as salaries grow and the interest component decreases.
• EPF's 8.25% tax-free return is equivalent to an 11% taxable gain for high-bracket taxpayers, making it a superior investment.
• Withdrawing ₹20 lakh from EPF to save ₹9 lakh in home loan interest means depleting a retirement fund that could grow to over ₹44 lakh in 10 years.

Why It Matters: Using EPF for debt repayment, especially home loans, often sacrifices significant long-term tax-free growth for short-term relief.