NEW DELHI: Nearly 7,000 expatriates are caught in a battle between India and the United States over contributions made by their citizens towards provident and pension funds and social security.

The Employees Provident Fund Organization, which handles provident and pension funds for the organized sector employees in India, recently tightened the norms which has resulted in protests from expats, and their employers. Following the amendments, international workers would be permitted to withdraw their accumulated balance only after they turn 58. Though contribution to PF and Employees Pension Scheme (EPS), which amounts to 12% of the monthly pay, was mandated in 2008, withdrawals were permitted at the end of an expat’s employment in India. Now, withdrawals are only permitted in case of permanent and total incapacity to work or in case of those suffering from cancer, leprosy or tuberculosis.

An exemption towards EPFO contribution has only been made in case of employees from countries with which India has signed Social Security Agreements and the list includes three nations-Belgium, France and Germany. For India, this is retaliatory action prompted by the refusal of the US to sign a Totalization Agreement that would make it possible for Indian professionals, several of whom are IT company employees on onsite visits, to get their dues when they finish their employment. In the absence of a Totalization Agreement, the US refused to refund the money deducted from the salaries of Indian professionals towards social security contribution.

Despite the Indian government making a case for a pact for over a decade, the US has refused to sign one saying India does not have a social security system. It has refused to accept the EPF or even the New Pension Scheme as one. In the absence of an agreement, Indians working in the US have complained for years that they are losing significant amounts.

A consultant told TOI that the EPFO amendment makes it virtually impossible for an international worker to withdraw money from his or her PF account or from the EPS. “You need a bank account into which money can be transferred by EPFO and in the absence of a visa, you cannot have a bank account,” the executive at one of the largest global consulting companies said. A senior EPFO official said that in due course, transfer to an account overseas might be permitted. But an FAQ (Frequently Asked Questions) on the EPFO website is silent on the proposal.

“Most of the international workers are well below the retirement age of 58 years and come to work in India for a limited number of years. If they are not permitted to withdraw the PF amount until the age of 58, huge sums of money will get blocked in their PF accounts (and may well be lost) since it would be extremely challenging for them to come back and reclaim this money upon retirement,” consulting firm PricewaterhouseCoopers said in a recent report. It further said that change was even more significant for those who had been contributing since 2008 as they were expecting to recover their contributions at the time of their repatriation and will have to wait for may more years to “get their rightful dues”.

Increasingly, foreign nationals are coming to the country for work to have India on their curriculum vitae. In addition, global corporations are posting expats in India to service international clients out of here. So the number of people affected by the EPFO order is going to rise in the absence of a Totalisation Agreement.

New PF norms leave expats in lurch 7 Feb, 2011 0047hrs IST TNN[ Surojit Gupta & Sidhartha ]

Written by Xavier Augustin
Xavier Augustin is the Founder and CEO of Y-Axis Overseas Careers, India's No.1 Overseas Careers and Immigration Consultant.