It’s a trade dispute with a difference. In an apparent move to help the country gain leverage against the US in a dispute over unfair social security payments by Indian workers , the labour ministry has moved to make things tougher for expatriates based in India.
The ministry has recommended stringent provisions in the Employees Provident Fund (EPF) Scheme to make Provident Fund (PF) withdrawals difficult for expats so that they can withdraw their savings only after they turn 58.
Officials say the amendment, equally applicable to expatriates of all nationalities, could increase India’s bargaining power with US authorities in pressing for a bilateral “totalisation agreement” through which mutual pains could be eased — like a double tax avoidance pacts.
They say India loses close to $1.5 billion (R7,000 crore) in contributions by Indian workers in US social security schemes that go waste when workers return. Overall, Indian expats lose around $48 billion (R2,23,700 crore) per year to social schemes of different countries.
The labour ministry has sought comments from the ministry of law and justice to amend the EPF Scheme formulated in 1952. “Discussions to sign totalisation agreements with many countries are on the fast track. Only with US, despite three rounds of talks, things do not seem to be moving forward,” a senior labour ministry official told HT. He added that ministry of law and justice was “not averse” to amendments in the EPF Scheme 1952.
Once a totalisation agreement of India with any country is signed, an expatriate in either country need not contribute to social security schemes of the host country.
If India and the US ink the deal, tens of thousands of Indians working in the US on H1B or L1 visas need not contribute to the US social security schemes and US expatriates need not contribute to an Indian provident fund.
American laws require that an employee must have worked for at least 40 consecutive quarters (10 years) in the US to make use of social security benefits. However, foreigners working in India can currently withdraw their Provident Fund deposits as soon as they leave India. It is estimated that around 75,000 US expatriates work in India at any given time.
US has totalisation agreements with more than 20 countries but is reluctant to sign one with India on the ground that India does not provide universal social security cover for all.
India has already inked totalisation agreements with Germany, Belgium, France, Switzerland, Luxembourg and Netherlands and active negotiations are under way with nine other nations that include South Korea, Canada and Norway.