PHDCCI asks govt to discuss double taxation issue with US

Industry body PHD Chamber of Commerce and Industry (PHDCCI) today asked the government to put the discussions with the new US administration on avoidance of double taxation on social security contributions on the fast track.

At present, an employer who sends his employees to the US for short-term assignments ends up paying social security tax both in India and the US.

The chamber said two governments can enter into an agreement, also known as Totalisation agreement, to obviate the problem of individuals working in the two countries and paying double taxes.

By virtue of the agreement between the countries, an individual continues to contribute to the social security scheme of the home country, despite being relocated to another country.

It is mandatory for over 4,40,000 establishments registered with the EPFO to deduct from the salaries of the foreign workers 12 per cent of their basic pay and deposit matching contributions, the chamber said.

A major irritant in signing the totalisation agreement between India and the US was non-coverage of expatriates working in India under the EPF, which is the Indian version of the social security tax.

The absence of a treaty with the US, where a large number of Indian citizens are working on short-term visas, has led to forfeiture of billions of dollars paid as social security tax, the chamber said, adding that an employee has to work for 10 years in the US to avail of benefits like old-age pension, disability insurance, health insurance and unemployment insurance.