India: Evolution Of Provident And Pension Fund Benefits To Expats

Last Updated: 27 September 2016
Article by Dhir & Dhir Associates

For several years, the expatriates in India bore the brunt of being ineligible to the social security benefits. Amendment to 'The Employees' Pension Scheme, 1995 Act (EPS, 1995)' that came into force on November 1, 2008 (by insertion of para 43A) is a step towards extending benefits to the expats or international workers as available to the Indian Nationals in Social Security Agreement (SSA) signatory countries.   

Expats refer to individuals who are not of Indian origin (and not holding Indian passports) but working in the Indian Territory. Till November, 2008 foreign nationals working in India were excluded from being members to the provident fund since in most of the cases their salaries exceeded the statutory limit of Rs. 6,500. With the amendment, a newly inserted term International Workers (IW) recognized three categories of workers: 

1st Category

Indian origin workers/ persons working in a foreign country that has entered into Social Security Agreement (SSA) with India. In this case, the workers are eligible to avail benefits under the social security of that country. 

2nd Category

International Workers (IWs) who hail from the country with which India has a Social Security Agreement.

3rd Category

Workers who hail from the country with which India does not have any SSA

The amendment brought the 2nd category of workmen within the ambit of the EPS Act. Till date India has signed 15 social security agreements with  Switzerland, Denmark, Belgium, Finland, France, Luxembourg, the Netherlands, Hungary, Czech Republic, Austria, Australia, South Korea, Norway, Sweden and Canada. The United States and the United Kingdom are contesting against the issue and not signatories to the agreement. A comprehensive social security agreement with Portugal is in the process of getting operationalized. In addition, a partial social security agreement with Germany is already operationalized. Another comprehensive social security agreement between India and Japan will be operational from 1st October, 2016.

Applicability of the Act & Membership to the Fund

After the amendment, the cap of salary with respect to the workers of Indian origin working in India was retained but due to insertion of Para 83 in EPFS, 1952 and Para 43A in EPS, 1995, there is no ceiling for the IW(s) to join the fund. Now, the IWs are liable to become member of the fund irrespective of the amount received by them as wages, dearness allowance, retaining allowances, etc.  

Criteria to become Member of the Fund as International Worker

  1. All the IWs other than employees who are given the status of 'detached employee' from 1.10.2008.
  2. Every excluded employee on ceasing to the status – from the date he/she ceases to be an excluded employee.
  3. The IW is liable to be the member of the fund irrespective of the currency in which he draws the salary including the split pay roll.

Liability of the Employer under the Act and the Scheme

Para 36 of the Scheme as amended with respect to the IWs and incorporated in Para 83 provides for the duties of the employer in this respect. A duty is cast on the employer to send to the Commissioner, particulars of IW(s) working in the establishment along with the details of the basic wages, retention allowance, etc. Under Para 36(2) there is a recurring duty on the employer to send to the Commissioner within 15 days of the close of each month till date, the return in the specified form. 

Every employer shall send to the Commissioner within fifteen days of the close of each month a return-

(a) in Form 5, of the employees qualifying to become members of the Fund for the first time during the preceding month together with the declarations in Form 2 furnished by such qualifying employees, and

(b) [in such form as the Commissioner may specify], of the employees leaving service of the employer during the preceding month:

Provided that if there is no employee qualifying to become a member of the Fund for the first time or there is no employee leaving service of the employer during the preceding month, the employer shall send a 'NIL' return.

An employee, once a member, continues to be the member of the fund unless he withdraws the fund under Para 69 of EPFS, 1952; or covered by a notification under section 17 of the Act; or covered under an order of exemption is passed under Para 27 or 27A; or if the benefits are settled in accordance with the social security agreement.

Contribution payable under the Act

The contribution shall be calculated on the monthly pay containing:

  • Basic wages
  • Dearness allowance
  • Retaining allowance
  • Cash value of any food concession 

Para 29 of the EPFS Act deals with both the employer and employee's contribution towards the fund.

(1) The employer shall pay the contribution payable to the Employees' Pension Fund in respect of 10[each member] of the Employees' Pension Fund employed by him directly or by or through a contractor.

(2) It shall be the responsibility of the principal employer to pay the contributions payable to the Employees' Pension Fund by himself in respect of the employees directly employed by him and also in respect of the employees employed by or through a contractor.

[Provided that the Central Government shall pay the contribution payable to the Employees' Pension Fund in respect of an employee who is a person with disability under the Persons with Disabilities (Equal Opportunities, Protection of Rights and Full Participation) Act, 1995 (1 of 1996) and under the National Trust for Welfare of Persons with Autism, Cerebral  Palsy, Mental Retardation and  Multiple Disabilities Act, 1999 (44 of 1999) respectively, up to a maximum period of three years from the date of commencement of membership of the Fund.]

Thus, an employee may contribute more to the fund by increasing the percentage of the contribution but the liability of the employer is limited to 12% of the salary and 10% rate is applicable for any establishment in which less than 20 employees, a sick industrial company, any company, which has been declared as a 'sick company' by the Board for Industrial and Financial Reconstruction, any establishment which has at the end of any financial year, accumulated losses equal to or exceeding its entire net worth and any jute, beedi, brick, coir and guar gum factories. 

There is no cap to the salary on which the contribution is to be made by the employer and employee for provident fund. However, under Employee's Deposit Linked Insurance Scheme, 1976, the minimum salary limit for making contribution is to be Rs.6,500.

Withdrawal Benefits for Service less than 10 years

Unlike the Indian workers who can withdraw their contribution to the fund under number of circumstances, the options available to IWs are limited. In such cases where service in India is less than 10 years, the employees could be eligible to avail benefit of totalization. In other cases where totalization comes below 10 years, then only those employees covered by a social security agreement will be eligible for a lump sum withdrawal benefit under the EPS, 1995. Such benefits are not extended to international workers of other countries.   

Employee Provident Fund

If the IW is covered under an SSA, the worker can withdraw the provident fund according to SSA. An IW from non-SSA country, can withdraw the provident fund at the age of 58 years only. However, exceptions are given if he or she retires due to any incapability to work or suffers from leprosy, cancer and tuberculosis.

Employee Pension Scheme

An IW will be eligible for pension in the following events:

  • Death
  • Permanent disability, or
  • Permanent retirement from the Indian workforce

Moreover, the IW can withdraw superannuation benefits to the extent of his permanent retirement from the Indian workforce.

Consequence of Non-compliance

The employer has the primary liability to deduct contribution from the wages of workmen and deposit the same at the PF department along with matching contribution in a prescribed form. Upon non-compliance, the same can be recovered in a manner provided in Section 8B& 8F of the EPF Act, 1952.

Moreover, the employer may face penal action for such non-compliance. Thus, there is no escape from complying with the provisions of the Act except to the persons engaged as 'consultants'.

In a Nutshell

The amendments have created a favourable impact in fostering international relationship. The profitability and competitive positioning of India as well as foreign countries will result in mutual growth and reduction in cost of doing business abroad. Both Indian and international workers will and consider India as a preferred occupational destination.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on

Click to Login as an existing user or Register so you can print this article.

Similar Articles
Relevancy Powered by MondaqAI
Singh & Associates
Singh & Associates
In association with
Related Topics
Similar Articles
Relevancy Powered by MondaqAI
Singh & Associates
Singh & Associates
Related Articles
Related Video
Up-coming Events Search
Font Size:
Mondaq on Twitter
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
Email Address
Company Name
Confirm Password
Mondaq Topics -- Select your Interests
 Law Performance
 Law Practice
 Media & IT
 Real Estate
 Wealth Mgt
Asia Pacific
European Union
Latin America
Middle East
United States
Worldwide Updates
Registration (you must scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of

To Use you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.


The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.


Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions