Are there social security/social insurance taxes in India? If so, what are the rates for employers and employees?
TThe Ministry of Labour and Employment, in a notification dated October 1, 2008, amended the “Employees’ Provident Funds Scheme, 1952,” and the “Employees’ Pension Scheme, 1995,” collectively referred to as the Indian Social Security Scheme. Accordingly, the scope of the Indian Social Security Scheme was extended to specifically include a new concept of “International Workers” (IWs).
IWs include expatriates working for an employer in India to which the Provident Fund Act applies and Indian employees working in a country with which India has entered into a social security agreement (SSA). Accordingly, all the expatriates holding foreign passports will qualify as IWs in India.
Consequently, all employees who fall within the definition of IWs are required to become members of the Schemes under the Provident Fund Act unless they qualify as ‘excluded employees’.
IWs are excluded from contributing towards PF:
IWs (other than excluded employees) are required to contribute 12 percent of the specified salary to the Indian social security scheme. Employers are also required to contribute 12 percent of their employees specified salary to the scheme. A portion of employer’s contribution i.e. 8.33 percent of salary is mandatorily contributed into the pension scheme.
Amendments in the Employees’ Pension Scheme, 1995
As per notification issued by Government of India, Ministry of Labour & Employment dated 22nd August, 2014, the employee who is joining and becoming the member of the fund for the first time on or after 1st Sep 2014 and has salary exceeding INR 15,000 at the time of joining the fund is not eligible to become member of Employees’ Pension Scheme, 1995.
Therefore, the employer’s entire PF contribution of 12% will be contributed towards Provident Fund account and there will be no diversion of employer’s share to the Pension Fund.
Thus, all International Workers who would be becoming the members of the Provident Fund for the first time on or after on or after 1st Sep 2014 and have salary exceeding INR 15000 at the time of joining the fund would not be eligible to become member of Employees’ Pension Scheme, 1995
Amendments in the Employees' Deposit Linked Insurance Scheme, 1976 (EDLI)
As per notification issued by Government of India, Ministry of Labour & Employment dated 22nd August, 2014; the wage ceiling has been enhanced from INR 6500 to INR 15000.
The contribution towards EDLI and its administrative charges will be subject to a salary cap of INR 15,000 in case of International Workers.
The contribution must be deposited on a monthly basis by the 15th of the subsequent month. Necessary forms and returns must be filed with the authorities by the prescribed deadlines.
As on 01 January 2016, India has signed Social Security Agreement (‘SSA’) with 19 countries viz., Belgium, Germany, Switzerland, Denmark, Luxembourg, France, Korea, Netherlands, Hungary, Norway, Czech Republic, Sweden, Quebec, Canada, Japan, Portugal, Finland Austria and Australia. Out of the 19 countries, the countries with which India has SSAs which are currently effective are as follows:
|Sr. No||Name of the country||Effective Date|
|1||Belgium||1 September 2009|
|2||Germany||1 October 2009|
|3||Switzerland||29 January 2011|
|4||Denmark||1 May 2011|
|5||Luxembourg||1 June 2011|
|6||France||1 July 2011|
|7||Korea||1 November 2011|
|8||Netherlands||1 December 2011|
|9||Hungary||1 April 2013|
|10||Sweden||1 August 2014|
|11||Finland||1 August 2014|
|12||Czech Republic||1 September 2014|
|13||Norway||1 January 2015|
|14||Austria||01 July 2015|
|15||Canada||01 August 2015|
|16||Australia||01 January 2016|
Apart from these SSAs, other SSAs have not yet become effective/ operational.
Withdrawal of social security contribution
The IWs who are covered under an SSA between India and any other country can withdraw their accumulated PF balances on ceasing to be an employee in an establishment covered under the PF Act.
However, where a person is not covered by SSA, he may withdraw the PF balance on retirement from service in the company at any time after 58 years of age or is faced with certain contingencies (death/ specified illnesses/ incapacitation).
In relation to pension withdrawal, the lump sum refund will be available only to those employees who are covered under an SSA in force and who have not completed the eligible service of 10 years even after including the totalisation of service under the respective SSAs. Employees not covered under an SSA will not get the lump sum refund.
Although, all employees would qualify to receive a monthly pension only if their contributory service in India is 10 years or more.
Are there any gift, wealth, estate, and/or inheritance taxes1 in India?
There is no estate tax levied in India.
Further, Wealth tax is applicable up to the tax year 2014-15 as the same has been abolished from tax year 2015-16 onwards.
Wealth-tax is chargeable at the rate of 1 percent of the net wealth of the individual, exceeding INR3 million, as on the last date of the relevant tax year (that is, 31 March). Individuals having taxable wealth are required to also file the wealth tax return annually.
Foreign citizens are taxable only in respect of their net wealth located in India irrespective of their residential status.
Individuals/Hindu Undivided Families who are non-residents, resident but not ordinarily resident in India, and Companies who are non-resident in India, are taxable only in respect of their net wealth located in India.
The assets liable for wealth tax are:
There is no gift tax payable by donor. However, income includes any sum(s), received without consideration (except for sums received from relatives, on occasion of marriage, by inheritance, and so on), by an individual, from any person, if the same exceeds INR 50,000 in the aggregate in a tax year. Furthermore, any gift-in-kind, being an immovable property or any other property, the value of which exceeds INR50,000, will become taxable in the hands of the recipient.
Are there real estate taxes in India?
Property tax/real estate tax is payable as per local municipal laws on commercial and residential property owned in the respective States.
Are there sales and/or value-added taxes in India?
Customs duty is payable on certain specified goods bought into India and other indirect taxes such as value added tax and service tax are payable on purchase of goods and rendering of services, respectively.
Are there additional taxes in India that may be relevant to the general assignee? For example, customs tax, excise tax, stamp tax, and so on.
Certain states in India levy a profession tax on employees. This tax is to be withheld from salary by the employer and is also deductible in computing the taxable income of the employee.
1Indian Wealth Tax Act, 1957.
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