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Posted on January 14 2009

Indians posted abroad may get exemption from paying for social security

By  Editor
Updated April 04 2023

Pacts signed with Belgium, France and Germany.

BusinessLine, New Delhi, Jan. 13 There could be reasons to smile for Indian workers posted abroad and Indian companies having employees in foreign countries. These workers are likely to be exempted from paying a hefty part of their salaries to the Government of that country on account of insurance for old age benefits if they are not going to avail it.

India is in an advanced stage of negotiations with more than a dozen countries for signing bilateral agreements for exportability of social sector benefits for migrant workers and this would be applicable to foreigners posted in India too. Once in place, it will solve the problem of double taxation, officials in the Ministry of Labour said.

Talks are at a stage of finalization with the members of the European Union and the US, the UK, and Australia, the official said, while the details have been finalized at official levels in case of Finland, the Netherlands, Switzerland, Luxemburg and Czechoslovakia.

With three countries — Belgium, France and Germany — agreements have been signed and the Ministry hopes to implement the first agreement, which was with Belgium, during the year 2009.

As of now, these workers end up paying 12.5 per cent in India on account of provident fund and social security charges applicable in the developed countries. According to estimates made by the Ministry of Labour, an Indian posted abroad with an Indian company pays around 30 per cent of his earnings on account of old age benefit which he seldom avails of.

According to senior officials in the Ministry of Labour, the nodal Ministry conducting the negotiations, once the portability of social security benefits is implemented, the problem of double taxation for the services offered by the Government on health care insurance and old age benefits such as pension will get streamlined.


As of now, a worker employed with an Indian company and posted abroad had to pay approximately an average of 40 per cent of his total pay on social security account out of which around 30 per cent goes for old age benefit and 10 per cent for health care benefits.

“We have asked for an exemption of five years for the 30 per cent going for old age benefit since most people come back before they become eligible to receive old age benefits,” Ministry officials said.

In the US, one becomes eligible for old age benefits only after they have paid the social security charges for a period of 40 quarters which comes to 10 years. It changes from country to country.

“This would save the worker’s money and the companies too will benefit because they will factor in this when deciding on employees’ compensation for postings abroad,” the official pointed out.


The agreements will also have a provision by which the total period of work spread over both the countries in determining the pension. If a person works in India for seven years and five years abroad, his pension gets decided upon the number of years in the last service. But now they will be added to arrive at the final figure, the official explained.


Simultaneously, the old issue of locational mobility per pension receivers will also be taken care of. As of now because of various problems related to currency convertibility it is difficult for a person residing in one country and collect pension in another country.

“We are creating a system by which pension could be reached to a person irrespective of where he is residing after retirement,” the official said.

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