Provident Fund Scheme for International Workers in India

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May 5 – The Employees’ Provident Fund Organization is a legislative body of the Government of India under the Ministry of Labor and Employment. It manages a mandatory contributory Provident Fund (PF), pension and an insurance scheme for the Indian work force. It is one of the biggest social security units in the world in terms of members and volume of financial transactions.

The Employees’ Provident Funds and Miscellaneous Provisions Act came (1954) into existence on March 4, 1952. The association is governed by a Central Board of Trustees, made up of representatives of the Government of India, provincial governments, employers and employees. The Board is presided over by the Union Labor Minister of India.

The EPF & MP Act was approved by Parliament and came into effect with effect from March 1, 1952 as part of a series of legislative interventions made in this direction. Currently, the following three schemes are in operation under the Act:

  • Employees Provident Funds Scheme, 1952 (Provident Fund Scheme)
  • Employees Pension Scheme, 1995 (Pension Scheme)
  • Employees Deposit Linked Insurance Scheme, 1976

Membership is mandatory for employees in enterprises coming under the scope of the law. As per law, most any enterprises in India is obligatory to have a registration with the basic standard being employment of 20 or more persons. Contribution is at present 12 percent of basic salary as employee’s share and a matching contribution by the employer, with the sum to be 13.61 percent of the total wages of the employees. Among the many benefits offered in addition to the compulsory Provident Fund (where the present rate of interest is 9.5 percent) are service Pension on retirement, death or disablement and a lump sum insurance payout in case of death of the member, to his nominee/family.

Provident Fund for international workers
International workers employed by a company in India to whom the Provident Fund Act applies would be required to become a member of the Provident Fund, unless he/she qualifies as an “Excluded Employee.”

Excluded employee
A “detached worker” employed by a company in India but contributing to the social security program of the source country in terms of the mutual social security agreement signed between that country and India shall be an “excluded employee” under these provisions.

Detached worker
An international worker, being not an Indian employee, offering to the social security program of the source country in terms of the mutual social security agreement signed between that country and India and exempt from making any contribution to the Indian system for the period and terms as set out in such an agreement is a “detached worker” for the purpose of compliance under the Indian system.

Contribution by international workers
The international workers (except excluded employees) are mandatory to contribute 12 percent of their salaries (not subject to any cap) to the Indian Provident Fund scheme. The exemption from making contributions for employees earning salary in excess of Rs.6, 500 per month does not apply to international workers. Additionally, the employers are also compulsorily to pay an equal amount, i.e., 12 percent of salary as their contribution to the scheme.

Provident Fund payment is not payable by any employee, including a foreign employee of an company who is otherwise not liable to PF under The Employees’ Provident Funds and Miscellaneous Provisions Act, 1952 (PF Act) for any reason, (for example, if the number of employees is less than 20).

Fundamental points

  • The PF regulations will be relevant to total salary irrespective of whether the salary is remunerated in India or outside India, split payroll, or multiple country sources
  • Every eligible international worker has to be registered from the first date of his employment in India. For existing international workers, the accountability started from November 1, 2008

The type of visa held by the employee may help in determining the purpose of his or her visit to India, e.g., an overseas national coming into India under an employment visa is “working” in India. It is relevant to note that the Indian government has freshly issued guidelines prescribing tough enforcement of employment visa requirements for foreign nationals entering India for contractual or project work, as well as clarifications on what the appropriate visa is, depending upon the exact nature of activities undertaken in India.

Social Security Agreements (SSAs)
Considering the monetary advantage and agreement relief for expatriates coming from countries with which India has signed SSAs, there has been momentous activity recently regarding the signing of SSAs between India and other countries as a result of these amendments to the PF schemes.

The Ministry of Overseas Indian Affairs has signed mutual Social Security Agreements with Belgium, France, Germany, Netherlands, Luxembourg, Switzerland, and Hungary; of these, only the agreements with Switzerland, Belgium and Germany are in effect. It is casually understood that similar agreements with other nations such as the Czech Republic, Sweden, and Norway are underway. Talks have also been started with the United States, U.K., Bulgaria, and several other countries.

Key Features of SSAs
An SSA offers the following types of benefits:

  • Detachment — Employees on an assignment up to specified periods are excused from making social security contributions in the host country provided they continue to make social security contributions in their home countries
  • Exportability of Pension — Normally, employees on assignment for more than the specified period and making social security contributions under the host country laws, will be permitted to “export” the benefits under the SSA to the home country on completion of their assignment or on retirement. However, this is not provided for under the social insurance agreement with Germany
  • Totalization of Benefits — The period of service rendered by an employee in the host country will be measured for his or her benefits “eligibility” purposes, and the payment of benefits to the individual from the social security systems of each country will be restricted, generally, to the length of service, on a pro-rata basis

Upon termination/ending of the employment, employee can claim his/her pension or Provident Fund in the following manner:

The explanation of “pensionable service” has been amended to include the period of coverage earned in another country under the relevant SSA. The government will not contribute to the international workers pension fund. The pensionable salary is to be calculated on the average monthly pay drawn during the contributory period of the employment. An international worker who is covered under a SSA, and leaves the job before being eligible for a monthly pension, shall be entitled to a totalization benefit. This may be provided by the applicable SSA. Also, where the international workers has not rendered the eligible service even after including the Totalization benefit, as may be provided by the relevant SSA, the benefit can be withdrawn as per Employees’ Pension Scheme, 1995.

Where the receiver under the scheme is covered under a SSA, the pension and other reimbursement shall be disbursed in the manner and as per the norms in the SSA.

Latest amendments
The employees’ Provident Fund organization, which controls provident and pension funds for the organized sector employees in India, freshly stiffened the rules. According to the rule, international workers would be permitted to withdraw their accumulated balance only after they turn 58. Although input to PF and Employees’ Pension Scheme (EPS) which accounts to 12 percent of the monthly pay, was mandated in 2008 withdrawals were permitted at the expat’s employment in India. At this time, withdrawal is only allowed in case of permanent and total incapacity to work or in case of these suffering from cancer leprosy or tuberculosis.

An exception 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. The alteration, and the suddenness with which it has been made effective, is bound to cause key problems to all International Workers coming from non SSA countries as well as their employer companies. The suggestion to acclaim the accumulated balance of PF to an Indian bank account would also make difficulty as International Workers would need to hold the Indian bank account until the age of 58, which may not be practically possible.

Also, for the expatriates, an Indian bank is a prerequisite to be able to get their funds. Therefore, holding a bank account in India is compulsory for all overseas workers employed in India.

Outcome of amendment
As most countries do not permit export of social security benefits, the amended scheme may have an optimistic effect on the Indian citizens working overseas, as they may no longer be requisites to donate to the social security scheme of the countries with which India has signed into Social Security Agreement.

This modification may also require various countries looking to enter into Social Security Agreements with India, mainly since such an amendment creates contribution to provident fund for expatriates working in India, thereby resulting in an increase in the expatriate related expenses.

The amendment is a welcome change. Though the disparities and confusions that have come hand in hand with the alteration must be given a serious thought and attempts must be made at the earliest to clear such confusions.

Other important points for International workers
The Provident Fund regulations will be valid irrespective of whether the salary is remunerated in India or outside India. In case of a divide payroll, the payment is required to be made on the total salary earned by the employee. Even where an overseas worker has numerous country tasks and spends some part of his time outside India, his full amount salary will be measured for Provident Fund contribution. There is no minimum period of stay in India for activation of Provident Fund compliance. Every eligible international worker has to be registered from the first date of his employment in India.

This article is also available on the Dezan Shira & Associates online resources library. To view the article, along with other relevant regulatory updates for the Indian market, please click here.

Dezan Shira & Associates is boutique professional services firm providing foreign direct investment business advisory, tax, accounting, payroll and due diligence services for multinational clients in India. To contact the firm, please email, visit, or download the firm’s brochure here.

16 thoughts on “Provident Fund Scheme for International Workers in India

    Joseph Campana says:

    How often is the 9.5 % interest compounded?

    yasmin herwig says:

    I worked in India for 1.5 years 01-11/08 to 27-05/09. I will never be coming back to India for work purposes.

    Is it true I have to wait until I am 58 to claim my monies??

    MANJULA says:

    can srilankan nations claim EPF after completing his/her working period in India (Before 58 years)

    Gunjan Sinha says:


    The Foreign nationals can claim EPF after completing working period in India, if their country is having a Social Security Agreement with India. This will entitle them to withdraw EPF at the time of ceasing to be an employee in the establishment. For rest of the countries, the nationals can withdraw EPF, after the age of 58 years.

    Prav says:

    I understand from the following article that even the interest on EPF contribution will stop if foreign workers leave the job in India because the account will become non-operational. Is this correct (point 23 of this article),

    If this is correct, foreign workers can neither get their PF contribution back until 58 years of age and on top of this, no interest on PF contributions after we leave. Completely dead in the water.

    Gunjan Sinha says:


    Since the provisions of inoperative accounts are not applicable in case of international workers, continue the restriction of earning interest will not apply. The international worker shall contribute to earn interest up to the age of 58 years or otherwise becomes eligible for withdrawal.

    Please contact, if you need a structured opinion in this matter.


    Guru says:

    I am an Overseas Citizen of India (OCI) holding a US Passport and I have been working in India for many years. I recently started working for my third employer and they have been contributing 8.33 % of my salary to the Pension Fund because of my “International Worker” status. I want to know if their interpretation is correct. To my understanding OCIs have parity with NRIs. Could you please throw some light on this? Also, my previous two employers were contributing the usual Rs. 541 per month towards the Pension Fund.

    Thanks for your help.

    Gunjan Sinha says:

    Hi Guru,

    The employer has correctly interpreted your status, 8.33% of your basic wages towards amount Social Security is as per current applicable laws.

    This was made mandatory for the cross-border workers in India in 2008. You may also migrate your earlier social security account to your current employer so that the same account continues and you can get the benefit of past contributions made by your employer.

    Best Regards

    Dr S.M.Singh says:

    An Indian co. wants to appoint a business representative of Thailand origin in Thailand.
    Indian co.has no set up in That country.
    The scope is to obtain order from the company outside India and forward to us for execution. He has to follow all work with customer.

    You are therefore requested to give your valuable suggestions on following points :
    1. Appointment by Indian company having establishment in India.
    2. The person of Foreign origin is employed directly at other country (Thai Land) where no establishment of Indian co. exists.
    3. The remuneration is being made on monthly basis in Foreign currency by Indian company.
    4. Applicability of PF

    Vrushali Kulkarni says:

    Is it possible that the employee is paid salary outside India and only the PF/ Pension fund contribution (employee and employer) is made in India? Or is it mandatory to pay basic minimum salary in India to be able to pay PF contribution?

    Raffy Roca says:

    Hi good day I would like to ask some curious problem regards with the pf for foreign expats.
    My visa is already expired and need to renew for another 5 years is there any chance to get the provident fund after finished 5 years beyond expired working visa?

    Thank you for your query. Our service team will be in touch with you shortly.

    Shodhan Shah says:

    our ex employee serve the organisation for 20 years and left the service and settled abroad. He has already withdraw the Provident fund. Now he wants to withdraw the entire pension fund. Can he withdraw pension fund? please let us know the procedure.

    N M Sadguru Water and Development Foundation

    @Shodhan. Thank you for writing to India Briefing. The former employee in question may be able to withdraw the entire pension fund depending on his current age. For more information, please contact our HR team at

    UDAY says:

    Whether International workers are eligible for withdrawal benefit (not under SSA) after 58 yrs

    Bradley Dunseith says:

    @Uday – Yes, international workers are eligible for withdrawal benefits after 58 years.

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