The US has refused to enter into a social security agreement with India, something that New Delhi has been pursuing for over a decade, which would have benefited lakhs of Indian workers who have worked or working there on short-term visas.
The US said they cannot agree for such a pact as the social security regimes in two countries are not compatible. India have been arguing that despite different systems of social security in place, European countries like Germany and France, as well as Canada have inked such pacts with India.
But the US remained unimpressed. Now, to get the benefit of the social security schemes, one has to work ten years in the US.
A totalisation pact helps avoiding double taxation of income with respect to social security contributions. The money Indian workers lose in the absence of social security pact is huge. As per the estimates of the National Association of Software and Services Companies (NASSCOM), Indians on short-term work visa pay $1 billion annually for various social security schemes. Around 3 lakh Indians work in the US now. At present, residents of the US pay 6.2% social security taxes on salaries up to $106,800 and 1.45% medicare taxes.
“Countries like France and Germany, with whom US has a similar pact, had entered into a social security agreement with us. These countries also have social systems different from that of US,” said Indian sources. Incidentally, Japan and South Korea are the two countries US have social security pacts with in Asia.