Provident Fund Scheme for International Workers in India

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Foreign workers taking up overseas assignments pay more attention to the tax regime of the country when determining costs, and often tend to overlook the social security laws of the country, which are equally important.

India requires every business entity employing more than 20 workers to register with the national social security system, and makes it mandatory for employees and employers to contribute towards retirement and insurance scheme.

The country’s social security system is governed by the Employees Provident Funds (EPF) Miscellaneous Provisions Act, 1952, which manages the following three schemes:

  • Employees Provident Funds (EPF) Scheme, 1952 (Provident Fund Scheme);
  • Employees Pension Scheme(EPS), 1995 (Pension Scheme); and
  • Employees Deposit Linked Insurance Scheme, 1976.

Provident fund for international workers

In October 2008, India brought foreign nationals working for an establishment in the country – whether a foreign company or a business domiciled in India, under the purview of the EPF Act.

Accordingly, every foreign worker employed with an establishment to whom the EPF applies must become a member of the provident fund (PF) from the first date of his/her employment. There is no minimum period of stay in India for activation of PF compliance.

The PF contribution rate for foreign workers registered with EPF (or IWs) is 12 percent. The PF rate is calculated on full salary of the IW irrespective of whether the salary is remunerated in India or outside India, split payroll, or multiple country sources. The employer contributes an equal amount, with the sum of PF being 13.61 percent of the total wages of the employees.

There is no cap on the salary on which contributions are payable by the employer as well as the employee. An IW can claim an income tax deduction on EPF contribution of up to INR 150,000 (US$ 2,168).

Exemptions

IWs are exempt from contribution towards PF only if their home country has a social security agreement (SSA) or economic-bi-lateral treaty with India.

Social Security Agreements

An SSA is a bi-lateral instrument that protects the interests of the workers in the host country. It allows international workers to avail the following benefits:

  • Detachment — avoid double social security contributions;
  • Exportability of pension — export the benefits under the SSA to the home country on retirement or on completion of the assignment in India; and
  • Totalization of benefits — aggregate service periods rendered in other countries and India to qualify for pension or retirement benefits.

Despite these benefits, very few countries have entered into an SSA with India. This limits the availability of SSA exemptions for international workers from countries like the US and UK, which are yet to ratify an SSA with India.

At present, India has SSAs with 19 countries, out of which 18 are in effect (see the list below).

List of Indias Social Security Agreements with Other Countries (3)

Withdrawal rules under EPF

An international worker may withdraw the accumulated balance in the EPF account in one of the following situations:

  1. at the time of retirements, that is, on or after 58 years of age;
  2. in case of retirement due to permanent and total mental or physical incapacity to work;
  3. in case of serious illness such as cancer, leprosy, or tuberculosis; or,
  4. on completion of Indian employment, if the IW’s home country has an SSA with India.

The facility to receive PF refund on the date of completion of Indian employment is not available for IWs who are not covered under SSA. 

This makes it challenging for expatriates belonging to a non-SSA country and working in India, as their provident funds are locked-in until they attain 58 years of age.  Besides, IWs can withdraw the funds only to an Indian bank account, post retirement – making the entire withdrawal process practically more difficult.

Withdrawal of funds under EPS

The EPS regulations do not recognize the employer’s contribution to the pension scheme. Since only only employer’s contributions are allocated to the EPF, the EPS does not entitle IWs to pension benefits when they leave India, regardless of accrued employer contributions.

The pension withdrawal is only available to employees who are covered under an SSA that has come to effect, and to employees who have not completed the eligible service of 10 years even after including the totalization of service under the respective SSAs.

Editor’s Note: This article was first published in May 2011 and is updated on May 3, 2019, to incorporate latest regulations.


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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:

    Hello,
    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:

    Hi,

    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),

    http://www.epfindia.com/IntWorkersNew/UpdFAQ_IntWorker_25052012.pdf

    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:

    Hi,

    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.

    Regards
    Gunjan

    Guru says:

    Hi
    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
    Gunjan

    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
    Dahod
    Gujarat

    @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 http://www.dezshira.com/services/payroll-human-resource-administration.

    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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