Social Security Agreements and India-US relations

A large population of Indian Diaspora works abroad and a significant population reside for temporary intervals. It makes it important for countries to bring a framework which protects people working outside from the dual payments to the social security.

What is a social Security Agreement (SSA)?

A social security agreement (SSA) refers to an agreement between two countries, which helps their internationally mobile workers in several ways as mentioned below:

• First is the equality of treatment. This means that the persons who ordinarily reside in the territory of one country keep receiving the equal treatment with respect to the social security contributions in the second country.
• Second is the portability of the social security benefits. This generally means that the old age, disability and survivors’ benefits of one contracting state are paid to the nationals of the other contracting state residing in the territory of a third State, under the same conditions as if they were national s of the first contracting state.
• Third is totalization. When employee from one country works in another and ends up paying taxes in both the countries. Totalization helps by eliminating such dual Social Security taxation. It also helps in filling the gaps in benefit of the protection for the workers who divided their career between two countries by totalisation of the period of contribution in the host country for determining the eligibility for benefits.

Current Position

As of now, India has only 13 Social Security Agreements in force. These countries with which India has an active Social Security Agreement include Belgium, Luxembourg, France, South Korea, Sweden, Finland, Czech Republic, Norway, Germany, Switzerland, Denmark, The Netherlands and Hungary.

Social Service Agreements and Indo-US relations

With a large population of Indians working in the US, India has been long pressing for an SSA with the US. An Indo-US SSA is relevant because:

• If the SSA becomes a reality then the Indian professionals working in the US will not be required to make social security contribution to the US, provided they are contributing to the provident funds in India.
• Also they can do so by obtaining a certificate of coverage (CoC) and be exempted from social security contribution in the host country. It would act as a certificate of exemption from the social security taxes on the same earnings in the other country.

The Indian professionals under the social security scheme of India will continue to be considered as local employees in India. Indian employees who are exempted from host country’s social security contribution under the social security agreements are not classified as international workers and higher allocation towards pension will not be required.

Also the totalisation clause would make the employee to aggregate the periods of contribution covered on the host and home country to get the benefits of Social security. An Indo-US SSA will also favorably impact the cost of employment.

What needs to be done?

For an effective Indo-US SSA points need to be taken care of:

• Under most of the signed SSA’s the nationals working in either country are exempted for a short duration, which is though extendable subject to mutual consent of the two authorities. It creates problem for those Indians who are working in long term assignment and continue paying taxes for dual contribution. Hence it is required to have an effective measure to exempt the contribution both for the longer as well as shorter duration.
• India needs to conclude the totalisation agreement or Social Security Agreement with the US. The US had in place Totalization Agreement, with several nations for the purpose of avoiding double taxation of income with respect to social security taxes.

With the globalization and the increased cross-border work culture it needs to have such agreements preventing the exploitation of employee working abroad and managing the mobile human resource of the country.