India HR and tax alert

November 2014
HR and tax alert
India
Payments of Indian social security benefits to International
Workers
Executive summary
On 20 October 2014, the Indian Provident
Fund Authorities issued a circular clarifying
the procedure for paying social security
benefits into an overseas bank account for
International Workers.
The provisions relating to the payment of
benefits to an overseas bank account are
mentioned in the Provident Fund law and
Social Security Totalization Agreements
signed by India. However, as the details of
implementation were not finalised by the
Provident Fund Authorities, until now it has
only been possible to request that benefits
are paid into an Indian bank account.
International Workers coming from a country
with which India has a Social Security
Totalization Agreement in force, which
allows the export of benefits, will be able to
request that benefits are paid into an
overseas bank account.
The circular can be accessed through the
link below:
http://www.epfindia.com/Circulars/Y201415/IWU_BankingAgree_IW_19453.pdf
Further information
International Workers are eligible to receive
the following benefits according to the
Provident Fund Law:
Under the Provident Fund Scheme
International Workers will be eligible to
withdraw a lump sum amount from the
Provident Fund account:
 On retirement at any time after
attaining 58 years of age;
 On completion of an Indian assignment,
if covered under a Social Security
Totalization Agreement, which is in
force.
Under the Pension Scheme
International Workers coming from a country
with which India has a Social Security
Totalization Agreement in force, will be
eligible to receive a monthly pension (if they
have eligible service of 10 years or more) or
a lump sum withdrawal benefit (if they have
eligible service of less than 10 years).
International Workers coming from a country
with which India does not have an
operational Social Security Totalization
Agreement will be eligible to receive a
monthly pension benefit (if they have eligible
service of 10 years or more). However, they
will not be eligible to receive any benefit
under the pension scheme if their eligible service in India is less than 10 years.
Under the Deposit Linked Insurance Scheme
A lump sum benefit of up to INR 360,000 (approx. USD 6,000) is payable upon
death of an International Worker.
Provisions relating to payment of benefits
An International Worker can receive these benefits by the following means:
 Directly into their personal Indian bank account.
 Directly into their employer’s bank account in India.
 Directly into an overseas bank account under the “export of benefits” clause of
a Social Security Totalization Agreement entered by India.
To date, India has 11 operational Social Security Totalization Agreements with
“export of benefits” clauses. These are with: Belgium; Czech Republic; Denmark;
France; Finland; Hungary; Luxembourg; Netherlands; South Korea; Sweden and
Switzerland.
Key changes
Since, the practical element for the overseas payment of benefits has now been
finalised by the Provident Fund Authorities, the benefits may be directly credited
to the overseas bank account of an International Worker if they are from a country
with which India has a Social Security Totalization Agreement in force, providing
the agreement allows for the export of benefits.
However, International Workers coming from a country with which India does not
have a Social Security Totalization Agreement will not be able to claim the social
security benefits in an overseas bank account but only through an Indian bank
account.
Claim forms with respect to the payment of benefits will remain the same.
International Workers coming from a country with which India has an operational
Social Security Totalization Agreement can now report their overseas bank
account details in the claim form in order to receive benefits in their overseas bank
account.
The payment will be made to the Regional Provident Fund Office, which will then
make the payment to the overseas bank account of the International Worker in
foreign currency.
The practicalities of this alert are totalization agreement specific, and if a client
has any specific questions, they should contact EY for guidance.
Next steps
Where assignees are eligible to receive benefits directly into overseas bank
accounts, they will need to complete the appropriate claim form detailing the
method by which they wish to have their benefits paid.
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All Rights Reserved.
EYG no. DN0782
ED None
International Social Security Services
Mike Kenyon
Tel:
+44 (0)20 7951 2583
Email: [email protected]
Gary Chandler
Tel:
+44 (0)20 7951 1280
Email: [email protected]
This material has been prepared for general
informational purposes only and is not
intended to be relied upon as accounting, tax,
or other professional advice. Please refer to
your advisors for specific advice.
Human Capital - India
Sonu Iyer
Tel:
+91 11 4363 3160
Email: [email protected]
2
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HR and tax alert