Govt tightens PF norms for overseas workers in India

"An international worker may withdraw the full amount standing to his credit in the Fund : a) on retirement of services in the establishment at any time after the attainment of 58 years, b) on retirement on account of permanent and total in capacity for work due to bodily or mental infirmity," said an amendment carried out by the Labour Ministry.

However, analysts said that these norms have been tightened for those countries that don't have social security agreements (SSA) with India and the move may prompt them to go in for such pacts.

India has such agreements with 11 countries, but they are effective only with Germany and Belgium.

"In general, international workers (IWs) coming from non SSA country will not be eligible to withdraw their PF accumulations before the age of 58. This may block huge amounts of contributions made by IWs and their employers," said Vineet Agarwal, Director with consultant KPMG.

This amendment, said Agarwal, will cause financial hardships to IWs who were making contributions to PF under the impression that they can withdraw the money on completion of their employment in India.

The move will prompt countries who do not have SSAs with India to sign such pacts. "The amendment may put pressure on the countries which have not entered into SSAs till date, to now enter into such agreements with India," Agarwal said.
The tax consultancy firm Deloitte said the amendments will raise the cost structure of these workers in India.

"This amendment will inflate the cost structure of Indian assignment of IWs and the employers will have to factor this additional cost in their financial budget," it said in a statement here.

IWs were earlier not covered under the Employees' Provident Fund Scheme. In October 2008, India  made changes in the scheme by bringing them under the purview of social security regime.

Accordingly, IWs and the employers for whom they are working in India are required to make social security contributions in India.