Social Security in India
A guide to the social welfare benefits available to overseas workers in India…
Traditionally, the family has been the informal social security system in India. Joint families often live together, with members taking responsibility for those who are in need.
Social security is available only to those who are employed in the organised sector (less than 10 percent of India’s workforce). The Employees’ State Insurance scheme provides medical care and other benefits (in the case of workplace accidents, temporary or permanent disability, incapacity, maternity leave, support for dependants) to employees who earn less than Rs15,000 a month.
- For information from the Ministry of Labour and Employment on India’s social security system: Click here
Employees’ Provident Fund
The Employees’ Provident Fund Organisation (EPFO) is a statutory body under the Ministry of Labour and Employment that administers social security regulations.
The EPFO covers pensions and survivors’ benefits in the event of an employee’s death. It is compulsory for all workers employed by companies with more than 20 staff. Employers must apply for the fund on behalf of their workers.
Since October 2008, all foreigners employed in India have been subject to the terms of the EPFO under the category of “international workers”.
The employee is required to contribute 12 percent of their salary to the EPFO, which is automatically deducted by the employer. Employers must match this 12 percent contribution. Employers are legally required to deduct these contributions and remit them to the EPFO.
Tax-free interest is earned on contributions made to the fund at a specified rate, which is updated regularly by the government. For 2012-13, the rate is 8.8 percent.
Foreigners can withdraw the accumulated balance from this fund only when they reach 58, except in the case of citizens of those countries that have a social security agreement in force with India. It can also be withdrawn in the case of permanent and total incapacity to work due to illness.
An international worker can request exemption from contributions to the EPFO if they are from a country that has a social security agreement with India, is contributing to their country’s social security system and has the status of “detached worker” (employees who have been sent to India by a company in their home country). In this case, the worker must obtain a “certificate of coverage” (also known as a “detachment certificate”) to qualify for exemption. This is issued by the social security authority in their home country and is valid only for the period of time stipulated in the relevant social security agreement.
- For more information on the EFPO: Click here
Bilateral Social Security Agreements
A social security agreement is a bilateral agreement between two governments to protect the interests of their citizens working in the other country.
Such agreements have provisions covering:
- Taxation issues (particularly the avoidance of “double taxation”)
- Equality of treatment for the workers of both countries
- Social security provisions
- Exportability of pensions (pensions can be paid in any country)
- Totalisation of benefits (the time spent working in the other country counts towards eligibility for pension benefits)
India has social security agreements with the following countries:
As of 2012, agreements with the Czech Republic, Denmark, France, Hungary, Luxembourg and Norway have yet to come into force. The Indian government is also negotiating social security agreements with countries such as Australia, Austria, Canada, Japan, Korea, Sweden and the USA.
- For more information on social security agreements: Click here
- For information on mandatory health insurance contributions see the Health Insurance page