Does the Indian Provident Fund Scheme apply to expatriate employees? Are they obliged to contribute to the Indian PF Scheme even if they are already making contribution for social security in their home country? How and when they will get back their PF contribution made in India.
The Government of India vide Notifications No. GSR 705(E) and GSR 706(E) dated 01.10.2008 had extended the Employee Provident Fund and Pension Scheme to all ‘International Workers’. The term ‘International Worker’ includes an employee other than an Indian employee, holding other than an Indian passport, working for an establishment in India to which the Provident Fund Act applies. Thus, the Expatriate Employee will normally fall in the category of ‘International Worker’, and the provisions of the Indian PF Act will apply to him.
Since the EPF contribution is calculated on the total salary earned by the employee, whether received in India or outside India, the expatriate will be required to contribute 12% (8.33% to PF and 3.67% to Pension Scheme) of their base pay. Similar amount will be contributed by the employer. In this manner the PF contribution in India becomes quite substantial. Therefore, if an employee has to contribute to social security schemes both in India and in his home country, a sizable portion of his salary will be locked up in social security scheme.
In the context of the EPF scheme, the Social Security Agreements (SSA) entered by India with other countries assume special importance. Where the expatriate employee belongs to a country with whom India has signed SSA, exemptions have been granted in certain cases to expatriate employees from participation in Indian EPF. However, where employees belong to a country with whom India has not signed any SSA, it is mandatory to participate in Indian PF Scheme irrespective of the fact whether he is contributing to social security in his home country or not.
As far as withdrawal of money from PF scheme is concerned Notification No. GSR 148 dated 03.09.2010 is relevant. This notification specifically provided that an ‘International Worker’, unless he is an exempted employee under respective SSA, shall be entitled to withdraw the balance of his PF Account only on retirement from service or after the attainment the age of 58 years.
The harshness of the above Notification will be clear if the problem is looked at from the expatriate’s angle. Normally expatriates come to India for a short duration; they do not always remain in India until reaching the retirement age of 58 years. In all such cases, his contribution to PF and all balance lying therein will be held-up in India until the employee reaches the age of 58 years.
Therefore, this issue was raised before the Government by various organisations. It is heartening to note that the Government has, in a major policy move, notified amendment vide notification number GSR 744(E) dated 05.10.2012 in the PF and Pension schemes to give relief to expatriate employees. As per the amended provisions, on cessation of employment in India, such international workers if covered under SSA with their resident countries, can claim refund of their accumulated provident funds. Earlier such withdrawal of PF was allowed only on retirement or on attaining 58 years of age. Now, one can withdraw one's PF as soon as one ceases to be an employee with the company covered under the Indian PF Act.
However, the aforesaid relief shall be available only in case of employees belonging to a country with whom India has signed SSA. As per the information available, at present India has signed SSA with Belgium, Finland, Switzerland, France, Luxembourg, the Netherlands, Hungary, Denmark, the Czech Republic, Republic of Korea, Norway and Germany only. Negotiation with several other countries is in progress. The problem in respect of other employees still remains un-resolved.Therefore, it is strongly felt that the Government should expedite finalization of SSAs with as many countries as possible. And in any case the aforesaid notification should be made applicable for all expatriate employees without any pre-condition of existence of any SSA.