Social Security Agreements With India

India supports the proposed discussions with the US Social Security Administration (SSA) on the long-standing totalization agreement, believing that the two countries` systems are now more compatible than before. The deal could help Indian companies in the United States save up to $4 billion in social security contributions a year. SSA is a bilateral agreement between India and a foreign country, which aims to protect the interests of border workers. The agreement provides for the avoidance of “double coverage” and guarantees equal treatment of workers in both countries from a social security perspective. As part of the secondment or abolition of the dual contribution, workers who have moved to a SSA country are exempt from social security in the host country for a certain period of time (specific to each SSA), provided that they continue to pay social security contributions in their home country. This benefit can be used by obtaining a “guarantee certificate” (CoC) from the national authorities responsible for social security and presented to the social security authorities of the host country. “In the absence of a SSA with the U.S., Indian employees face a difficult time, as billions of dollars of their revenues are invested in it. On the other hand, American workers in India do not suffer because compulsory social security in India is too low for an American worker,” said Shankar Agarwal, former union secretary of the Union. “The United States believes that due to the incompatibility of the two social security systems, the totalization agreement may not be plausible in the current context,” says the joint CII-USIBC report, which recommends an analysis of the feasibility and prospects of an agreement. While cross-border issues have arisen in the areas of taxation, immigration and social security in recent times, social security issues are also becoming more important, as they concern the pension benefits of individuals who, across borders, venture for employment.

“The issue of totalization has also arisen. There was a feeling that Indian pros who spend less than eight years and contribute to social security… really need to get that money back,” Shringla said Tuesday. During this period, India signed and commissioned 18 SSAs with other countries. As a general rule, benefits such as replacement, pension exportability, total benefits and withdrawal of social security benefits are available under this SSA. According to Richa Mohanty Rao, partner of the law firm Cyril Amarand Mangaldas, SSAs are akin to double taxation agreements in which workers in the signatory states are not subject to the social security laws of the host state when they contribute in their country of origin. The result is a more equitable treatment of employees and employers on the basis of reciprocity, she added. According to industry estimates, Indian companies, mainly in the information technology sector, lose up to $4 billion a year in U.S. Social Security, which is never reimbursed.

“India is in favour of discussions due to the introduction of new social security systems in the country in recent years and the expansion of coverage, which has led to greater compatibility of the two countries` systems,” a development official told BusinessLine.


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