Skip to main content

Provident fund for expats not before retirement at 58 yrs

Change Aims To Make US, UK Agree To Social Security Pacts


   EXPAT workers can now withdraw their provident fund balances only on retirement at 58 years of age, a much tighter condition that the government hopes will put pressure on countries such as the US and UK to enter into social security agreements.

   Expats workers could earlier withdraw their accumulated balances in the provident fund account at the end of their employment in India.

   The new regulation will have far reaching consequences....Employers will face higher cost of sending employees to work in India.

   However, the move will not impact expats from countries that have a totalisation or social security agreement with India, creating an incentive for other countries to sign similar agreements.

   India has signed nearly 12 social security agreement but only two with Belgium and Germany are currently operational.

   Indian workers are allowed to withdraw their PF balances under a number of circumstances, international workers will be only able to do so on retirement at 58 years against 55 years for local workers, according to the latest changes made through an amendment to the Employees' Provident Funds Scheme, 1952.

   However, in the case of permanent and total incapacity to work due to metal infirmity withdrawal will be allowed.


   Overseas workers will need to keep their bank account in India till the refunds are received in such account.


   For example, an foreign worker who completes his employment in India at the age of 50 years will have his contribution blocked for 8 years and will have to keep his bank account open till then.

   Foreigners will be happy leaving their funds in India, which will earn nearly 9% return against much lower they can get back home.

   But there is a new rule expected to come into effect from next April as per which provident fund accounts inactive for than three years will not earn any interest. Once this rule come into effect this extra return will be available only for three years after an expat leaves India.


   India had in 2008 made it mandatory for expats to contribute to employee provident fund and employee pension scheme, same as that for local workers.


   Under these schemes an employee contributes 12% of his basic salary plus dearness allowance and his employer makes a matching contribution.


   When an Indian company sends an employee on an assignment for 2-3 years, he and his employer have to contribute to the social security system prevalent in that country as also to provident fund back home.


   This has been a big bone of contention between India and the US, and to some extent with the UK.


   India has been for some time trying to convince the US and UK to enter into a totalisation agreement but no deal has been reached so far.


   Totalisation or a social security agreement is a reciprocal program that prevents double payment to social security systems between countries.


   While this puts an additional burden on an employer, it does not benefit the employee in any way as in most countries the minimum duration for deriving any benefit is 10 years.


   According to estimates, Indian IT professionals in the US contribute close to $1 billion every year as social security taxes. So, over time, such developed countries end up collecting substantial amounts of tax from expat workers who derive no benefit from the proceeds of the tax whatsoever.


   India hopes to get these countries to negotiation table by tightening its own rules, but the move has not gone down well with industry experts.


   While India is asking for liberalised labour mobility across the world, it is making laws that clearly discriminate workers purely on ground of nationality.

 

Popular posts from this blog

What are the factors affect the changes in Interest Rate of Fixed Deposits?

  What are the factors affect the changes in rate of Fixed Deposits? Fixed Deposits are now considered to be a very old fashioned method of saving, but still attract many investors since they have guaranteed returns at the end of the tenure of the investment at a decent interest rate. There are various factors that affect the rates of interest for a Fixed Deposit. Policies of the Reserve Bank of India   - The several norms and restrictions posed by the Reserve Bank of India , in order to gain optimum control over credit and inflow and outflow of fund throughout the country. The repo rate changes, cash reserve ration tends to change and these changes affect the banking products like Fixed Deposits, loans etc. Recession   - When unemployment in a country crosses the benchmark set Recession hits, and slowly the country faces an economic slow movement, affecting the purchasing power of the people in the country, forcing the Reserve Bank of India to release more funds in the financial marke...

Capital Protection Oriented Funds

Download Tax Saving Mutual Fund Application Forms Invest In Tax Saving Mutual Funds Online Buy Gold Mutual Funds Leave a missed Call on 94 8300 8300   Capital Protection Oriented Funds   Erosion of capital is one of the key concerns for investors wanting to invest in equity mutual funds. To address this concern, asset management companies have launched Capital Protection Oriented Funds (CPOFs). What are CPOFs? CPOFs are generally three to five-year, closed-ended funds where 70-80% of the portfolio is invested in fixed income securities, which mature on or before the scheme's tenure. The investment in fixed income securities grows to 100% at the end of the tenure, providing the investor with capital protection. The remaining portion (20-30%) is used to take exposure to equity, which provides the upside. Exposure to equities is either by directly buying equity stocks (plain vanilla CPOFs) or by b...

Understanding Your Cibil Credit Information Report

   WE ARE all familiar with the anxiety and uncertainty that we feel when applying for a loan. After all, it's the lender who decides whether we can own our dream home, our first car, or whether our children can pursue higher education. In a nutshell, a better life depends on the lender's decisions.    While other factors do play a part in the lender's decision, the Cibil Credit Information Report ( CIR ) plays a crucial role in a lender's decision to approve a loan application.    Previously, lenders would treat all loan seekers equally. Each applicant, if approved by the lender's internal credit policy, would be charged at the same interest rate for a particular loan size and purpose. The lenders would charge a higher interest rate to all the borrowers, in order to compensate for the possible default of a small portion of the loan disbursed. In other words, it's like a professor (the lender) punishing an entire class (borrowers) for the mischief played b...

Good Loan

Why Is It A Good Loan?: Loans against gold are cheaper and better than personal loans as the former are available at lower interest rates. In contrast, the interest rates on personal loans are not standardised and can vary from bank to bank. Also, a personal loan depends on a host of factors including, the borrower's salary, profession and the purpose for which the loan is being taken.      For instance, the interest rate on a personal loan of 5 lakh falls in a wide range of 15-30%. But loans against gold are available for as low as 11%. Secured borrowing such as a loan against gold, investments or property is cheaper because it is backed by some assets, which command a good value at any point of time. If the borrower defaults on the loan, the banks can liquidate the assets to settle the loan account.    Being a secured loan, the risk of default and credit losses is significantly lower in this loan compared to other forms of loan for personal use. Given the lower risk, gold loa...

Mutual Fund Review: ING Dividend Yield

  ING Dividend Yield's small assets enable the fund manager to churn in impressive returns… Strategy The aim of the fund is to invest in stocks which offer a high dividend yield. This fund deploys a value based strategy which aims to gain from investing in fundamentally strong and free cash flow generating businesses. The scheme focuses not only on growth but also on the cash generated by the business, which mostly leads to stable returns even in volatile markets. This fund has a low volatility because of its investment in high yielding stocks. The scheme tries to include stocks that yield dividend above the dividend yield of the Nifty and stocks with liquidity, which throws up a universe of 150 stocks.   Our View Launched in October 2005, this fund invests at least 65 per cent of its assets in high dividend yield stocks. The fund has consistently maintained a mix of stocks across varying market capitalisation, with a higher tilt to mid caps compared to small caps. Howev...
Related Posts Plugin for WordPress, Blogger...
Invest in Tax Saving Mutual Funds Download Any Applications
Transact Mutual Funds Online Invest Online
Buy Gold Mutual Funds Invest Now