Pact with US can be manna for IT pros

Via DNAIndia.com
12/04/2006

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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