Social Security for OCIs Employed in India
Overview
Social security in India is governed by the Employees’ Provident Funds and Miscellaneous Provisions Act, 1952 (EPF). In 2008, the government made the social security scheme mandatory for cross-border workers by introducing the concept of International Workers (IW). Citizens of certain countries, such as the USA, who are Overseas Citizens of India (OCI) and return to India for employment, are classified as IW.
Contribution Rules for International Workers (IW)
-
Contribution Rate: Both the employee and employer contribute 12% of the employee’s wages. For Indian workers, this is capped at ₹15,000 per month, but this cap does not apply to IW.
-
Wage Scope: The scope of wages for IW is much broader than for Indian workers, resulting in higher deductions for Provident Fund (PF).
-
Reporting: Employers must report foreign citizens as International Workers to the Provident Fund organization.
Supreme Court Judgment
On February 28, 2019, the Supreme Court ruled on what constitutes wages for calculating the PF amount. This judgment has significant implications as many allowances are now considered wages if certain conditions are met, regardless of how the employer categorizes them. Employers may be liable to make good any shortfall in PF contributions along with interest, benefiting the IW.
Importance for OCI Employees
OCIs taking employment in India should be aware of the potential benefits under this clause. Many employers have failed to comply with IW rules of EPF and have had to pay back contributions, interest, and penalties to the employee’s PF account after the oversight was identified.
Refer EPF website for IW for more details.