The India-Netherlands SSA provides for the following benefits:

Avoidance of double coverage: When an employee who is employed by an employer in the territory of Netherlands and paying contributions under the legislation of Netherlands is posted by that employer in India to work on its account, she shall remain subject to the legislation of the Netherlands and continue to pay contributions in Netherlands, as if she continued to be employed in Netherlands subject to the condition that the foreseeable duration of her work does not exceed 60 months.

Exportability of Pension: Exportability of benefits acquired under the legislation of one country to the other country or to a third country is possible.

In the absence of a Social Security Agreement, all foreign nationals in India are required to make social security contributions in India on their total (i.e. both Indian and overseas salary) monthly prescribed salary under the Employees’ Provident Funds and Miscellaneous Provisions Act (PF Act). The PF Act has instituted three social security schemes and the contribution requirements for each of these schemes are indicated below:

Employees’ Provident Fund Scheme (EPFS): The Employee contributes 12% of full monthly pay as prescribed under the PF Act. The Employer also contributes 3.67% of full monthly pay in this scheme.

Employees’ Pension Scheme (EPS): The employer contributes 8.33% of full monthly pay in this scheme

Employees’ Deposit linked insurance scheme: The employer is required to contribute 0.5% of monthly salary and the salary is capped at INR 6500 for this scheme

Once the agreement is effective, the above contributions need not be made under the Indian PF Act. The exemptions are however meant for short-term postings of not exceeding 60 months. The exemption from payment of social security contributions in India will be available initially for a period of 60 months. However, the social security authorities may extend the period of exemption beyond this period by mutual consent.

Since the Dutch expats are eligible for exemption from the PF contributions in India, they will not be eligible for any benefit under the PF Act in India if they do not make any contribution under the PF Act.

Pre-conditions to obtain the benefits under the SSA

Process for obtaining Certificate of Coverage

The employer and the employee will have to apply to the designated social security authority in Netherlands for obtaining a certificate of coverage (COC)
Generally, a COC contains the following particulars:
With regard to employee:
Name
Address
Nationality
Date of Birth
Social Security Number
Duration of employment in India
With regard to the employer:
Name of the employer firm
Address of the employer in Netherlands and India
Social Security Identification Number

Open Issues

There are a few issues that are still unclear at this stage. Some of the major issues that need further clarity in the social security regulations are as follows:

Prior to the agreement coming into effect, 15.67% of the prescribed salary (12% of the Employee+3.67% of the Employer) went into a defined contribution individual account known as provident fund. Another 8.33% of the salary (from the employer contribution) is earmarked for the pension fund. In the case of non-SSA countries, this 8.33% contribution is not given back to the employees if they have not completed ten years of service in India. However, the PF accumulation is refunded back in the following situations:

On retirement from service in the establishment at any time after the attainment of 58 years of age;

On retirement on account of permanent and total incapacity from work due to bodily or mental infirmity duly certified by the medical officer/ registered medical practitioner designated by the establishment

On suffering from tuberculosis, leprosy or cancer, even if contracted after leaving the service on the grounds of illness but before the payment has been authorised;

In respect of the member covered under an SSA, on such grounds as specified in such SSA.

Since the Indo-Dutch agreement does not specifically provide for refund of accumulations at the time of repatriation of an employee to her home country, it remains to be seen whether the social security agency in India (EPFO) will allow the refunds immediately on termination of employment of Dutch expats working in India.

Similarly, it is still unclear whether the Dutch expats in India will be entitled to a refund of their pension fund contribution if their service in India is less than ten years.

One of the recent changes in the social security rules in India is the non-crediting of interest on dormant accounts. An explicit ruling on whether this new regulation will impact the expats, who have repatriated to their home country, is awaited from the authorities in India.

For further details, please contact rambir@kpmg.com