India Tightens Provident Fund Withdrawal Rules for International Assignees
The Ministry of Labour and Employment has amended the provisions of the Provident Fund (PF) and limited the circumstances under which withdrawals can be made. Assignees can no longer make a withdrawal from the fund on completion of their assignment.
In addition, the Ministry has also modified the Employee Pension Scheme (EPS) rules. The Indian Government will cease to make contributions to the account of International Workers. Employer contributions will no longer be restricted to 8.33% of INR 6,500 but will be computed on monthly pay.
Further, the availability of benefits under the EPS has now been restricted to members from SSA countries. India has signed eleven social security agreements, but only two are in force at present (Belgium and Germany).
The PF and EPS amendments will inflate the cost of assignments to India and employers will have to factor these additional costs in to their budgets. Without action, PF contributions will, in most circumstances, have to be regarded as a “lost cost” for employers assigning employees to India.