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Pact with US can be manna for IT pros

Indo-US Totalisation Agreement would mean Indians working in the US may be refunded the money they paid for social security in the US.

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NEW DELHI: The United States will take up the issue of Totalisation Agreement with India next week.

An accord would mean Indians working in the US may be refunded the money they paid as social security contribution in the US  —  after they leave the country, said US undersecretary for international trade, Franklin L Lavin, here on Monday.

The Totalisation Agreement is a pact between the US and another country that eliminates dual social security coverage and taxes for social security programs.

Currently, European nations return the money to the overseas employee who accrues it under the social security head, but the US does not do so.

According to Nasscom estimates, the Indian IT industry loses about $300 million annually because of the absence of a Totalisation Agreement with the US.

“A chunk of H1B visa availed for going to US is used by the IT professionals. This category of visa is valid for only three years and can be extended by another three years. Therefore, an employee who pays the social security taxes for six years comes back without availing of its benefits. They become applicable only if a person lives in the US for 10 years or 40 quarters,” explained Sunil Mehta, vice-president, Nasscom.

In some cases, as much as 22.5% of an expat’s salary is deducted towards social security expenditure.

The US stand is that it will return the money if there is a similar social security scheme. The only similar scheme in India is the employees provident fund, which is not recognised by the US as an equivalent.  Once there is a Totalisation Agreement with the US, the money could be given back to the company or the IT professional - in short, it could flow back to India.

The Indian IT industry had been lobbying with both the US and Indian government to ink the agreement and spell out clear-cut guidelines for employees working overseas and in India and pave the way for uniformity in the employee issues. The matter has assumed importance of late, as there has been ambiguity in the applicability of laws in companies, which have operation in both these countries. In fact, Nasscom, has been lobbying for this for the last 11 years adds Mehta.

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