How the India-UK Double Contribution Convention benefits employers and employees
On 6 May, India and the UK took a monumental step in strengthening their economic ties by finalizing a landmark free trade agreement (FTA). It's not just a trade pact; it represents a commitment to fostering deeper economic collaboration between two of the world's largest democracies. Alongside the FTA, both nations have agreed to negotiate a reciprocal social security treaty—the Double Contributions Convention (DCC)—which is expected to significantly impact businesses and employees moving between the two countries.
The Double Contributions Convention
The DCC is designed to facilitate the movement of employees between India and the UK by addressing the complexities of social security contributions. Under the current system, Indian nationals working in the UK are required to contribute to the UK National Insurance Contributions (NIC) after a 52-week exemption, if applicable.
Also Read: What makes Mirae Asset's Swarup Mohanty paranoid about his retirement corpus
However, this system has its drawbacks, particularly for those who do not stay in the UK long enough to benefit from the contributions they make. For instance, Indian nationals may not receive any benefits if they work in the UK for less than 10 years.
The DCC aims to resolve this issue by allowing employees temporarily working in the other country for up to three years to pay social security contributions in their home country. This provision is crucial as it prevents the fragmentation of social security records, ensuring that employees maintain continuous coverage and benefits.
Benefits for Indian nationals in the UK
One of the most significant advantages of the DCC for Indian nationals is the exemption from paying UK NIC for a period of three years. This exemption means that Indian employees can continue contributing to the Employees' Provident Fund (EPF) in India, enjoying uninterrupted social security benefits. This arrangement not only eases the financial burden on Indian workers but also allows them to retain their social security benefits in India, which is particularly important for those who plan to return home after their stint in the UK.
However, it is essential to note that Indian nationals working in the UK may still be required to pay the UK immigration health surcharge. This surcharge is a separate fee that contributes to the National Health Service (NHS) and is applicable to all foreign workers in the UK.
Implications for UK nationals in India
The DCC also extends its benefits to UK nationals working in India. Currently, UK nationals qualify as 'international workers' under the EPF Scheme in India, which mandates that employers contribute 24% of the gross salary. Upon reaching the age of 58, individuals can claim a full refund of their contributions, along with interest, upon leaving India.
Also Read: Details on rent, home loan, TDS: ITR forms seek more disclosures this year
Under the DCC, UK nationals temporarily working in India will be exempt from contributing to the EPF for three years. Instead, they will continue to contribute to the UK NIC, ensuring that they maintain their social security benefits in the UK. This reciprocal arrangement is expected to encourage more UK nationals to consider employment opportunities in India, knowing that their social security contributions will not be adversely affected.
Early withdrawal benefits and future considerations
A critical aspect of the EPF Scheme is that it allows International Workers from countries with which India has entered into social security agreements to claim full withdrawal of their contributions upon completion of their Indian employment, regardless of their age. However, it remains unclear whether UK nationals who have previously contributed to the EPF will be eligible for early withdrawal benefits under the new DCC.
As the DCC is still in the negotiation phase, both countries will need to clarify this point to ensure that UK nationals are fully informed of their rights and benefits. The successful implementation of the DCC will depend on the completion of relevant processes in both India and the UK, and stakeholders will be closely monitoring its progress.
A step towards enhanced economic ties
The India-UK FTA and the accompanying DCC represent a significant leap forward in the economic relationship between the two nations. By addressing the complexities of social security contributions, the DCC is poised to facilitate smoother employee mobility, fostering greater collaboration between Indian and UK businesses.
Also Read: Fund houses suggest these four tweaks to make mutual funds even more sahi
As both countries work towards finalizing the DCC, it is essential for employers and employees to stay informed about the benefits and implications of this agreement. The DCC not only promises to enhance the social security landscape for employees moving between India and the UK but also signifies a broader commitment to strengthening economic ties and promoting mutual growth.
As these agreements come into force, they will undoubtedly pave the way for new opportunities and collaborations, benefiting businesses and employees alike.
Sonu Iyer is partner and national leader, people advisory services-tax, EY India, and Puneet Gupta is tax partner, EY India.
Hashtags
Try Our AI Features
Explore what Daily8 AI can do for you:
Comments
No comments yet...
Related Articles
Time of India
17 minutes ago
- Time of India
Operation Sindoor: Pakistan dossier 'reveals' 7 more targets India hit
NEW DELHI: Pakistan said India conducted strikes at seven more locations than the targets officially acknowledged by Indian armed forces between May 7 and 10 during Operation Sindoor . A Pakistan govt document on its Operation Bunyan al-Marsoos (Iron Wall) and India's "unprovoked aggression", shared with its media, lists out Indian drone strikes at Attock, Bahawalnagar, Gujrat and Jhang (Punjab province), Peshawar (Khyber-Pakhtunkhwa province), and Chhor and Hyderabad (Sindh province), which it claimed killed many civilians. None of these places were mentioned in the detailed briefings conducted by Indian foreign and military establishments. "We had disclosed the targets we hit in the briefings. This Pakistani document could be a propaganda attempt to show that India also targeted civilian sites," an Indian defence official said. After Pahalgam terror attack that killed 26 civilians, India on May 7 hit 4 terror hubs in Pakistan and five in POK, in calibrated strikes against terror infrastructure across the border, without targeting any Pakistani military base or civilian centre. The targets ranged from Sawai Nala camp in Muzaffarabad in north to Markaz Taiba in Muridke (Lashkar-e-Taiba HQ) and Markaz Subhan at Bahawalpur (Jaish-e-Muhammed HQ) in south. After Pakistan escalated the situation by targeting Indian military bases and civilian centres with missiles and waves of drone swarms, IAF struck at least nine Pakistani airbases and at least four military radar sites.
Time of India
23 minutes ago
- Time of India
In New York, Khalistan backers heckle doctor who aided 2020-21 farm stir; Dr Swaiman says he is proud of Indian roots, Tricolour
Bathinda: Dr Swaiman Singh, who played a vital role during the 2020-21 farm stir on Delhi borders, was heckled by pro-Khalistan individuals at a gurdwara in New York on Sunday afternoon. The pro-Khalistan elements were angry because he displayed the Indian tricolour during the farmers' protest. The show of resentment came just days ahead of Sikhs across the world remembering those who were killed in Indian Army's Operation Bluestar at Golden Temple on June 6, 1984. Despite the opposition, Dr Swaiman stood his ground and delivered a speech for which he was invited by New York Sikh Cultural Society. A large congregation was held at the NY Sikh Cultural Society Gurdwara on Sunday afternoon (early hours of Monday in India). Dr Swaiman and former New York governor Andrew Mark Cuomo were invited by the society to deliver a lecture. Undeterred, Dr Swaiman delivered his response, challenging the group to open dialogue. Speaking to TOI over the phone from the US, Dr Swaiman said it was true that Sikhs living in various parts of the world were angry over the way their revered religious place was attacked by the govt in 1984, and how justice had not been delivered till now. "But, being an Indian, I have displayed the tricolour a number of times, and I am proud of it. Whatever happened in 1984 was an attack by a govt of a particular political party, it does not denote all of India. We may be angry with the govt or party, but not with India," he said. Dr Swaiman added he too had been branded a "Khalistani" in the past and this was not right. "ThzZ country should look into the grievances of Sikhs and deliver justice. But, just some people opposing me cannot undermine my commitment the people of my nation, where my team is regularly working," he added. The NY Sikh Cultural Society Gurdwara remains a vital community hub, fostering dialogue and cultural unity. "This incident highlights the need for constructive conversations to bridge divides within our communities," he said. Dr Swaiman's family belongs to Tarn Taran district in Punjab. During the farm struggle, his organisation, '5 Rivers Heart Association', held medical camps at the protest site to help the protesters.
Time of India
an hour ago
- Time of India
Pakistan aimed to crush India in 48 hours, but folded in 8 hours: CDS Chauhan
PUNE: Chief of Defence Staff General Anil Chauhan said that "on 10 May at about 1am, Pakistan aimed to bring India to its knees in 48 hours" but "their operation, which they thought would continue for 48 hours, folded up in about eight hours". Tired of too many ads? go ad free now "Then they picked up the phone and said they wanted to talk," Gen Chauhan said. He said was the first time India had engaged in non-contact warfare. "We didn't see each other. We saw it either through radar or at different ranges, except for what was happening on the LoC. It was a mixture of kinetic and non-kinetic war. When I say non-kinetic, that happened in the information domain and cyber domain. And, of course, there were kinetic operations where destruction was being caused. It was also nonlinear in nature. So there's something happening on the LoC and something happening as far back as Sargodha." He spoke about how India networked all its air defence architecture and was using AI for predictive analysis. CDS: India accepted Pak's call for de-escalation, but not immediately So better and faster information was available to our side. We also tried to kind of network our counter UAS system, which was countering drones. And in the 7-15 days, we were able to do that," Gen Chauhan said. The CDS, delivering a special lecture organised by Savitribai Phule Pune University's department of defence and strategic studies on the "Future of War and Warfare" on Tuesday, also touched upon data-centric warfare, which will be based on data analysis deciding cognitive or decision superiority. "Similar green shoots of that were visible in Op Sindoor," he said. Tired of too many ads? go ad free now He also explained how, through Op Sindoor, India raised the bar and redrew new lines for military operations in response to terror. Referring to his previous media statements about India suffering losses, Chauhan said, "You should be able to understand what went wrong, rectify your mistakes, and go out again despite the initial setbacks. That is a hallmark of a professional force. And that's the kind of thing we displayed. What I said in a couple of my interviews - that losses are not important, it's the outcome which is important." Chauhan likened it to Test cricket, where, when one side wins by an innings, there are no questions about how many balls or players played. Gen Chauhan said they would share data on the result of Indian strikes based on technical parameters like electronic intelligence and signal intelligence at some point. Stating that it was Pakistan's strategy to bleed India by a thousand cuts, Chauhan said Gen Asim Munir (now field marshal) had spewed similar venom against India and Hindus a few weeks before Pahalgam. "But these decisions can be retracted as Pakistan is faced with a different kind of prospect, that it faces military action in case we find terror happening against us. So we have kind of raised the bar. We have connected terror to water and we have drawn out new lines for military operations against terror." When Pakistan did ask for talks and de-escalation, Gen Chauhan said India accepted, but not immediately. According to the CDS, Pakistan's decision to talk stemmed from two facts: "They must have assumed that if they continued in this mode, they were likely to lose much more. And the second, since they struck us on multiple fronts, they still did not have the benefit of understanding what they struck and they wanted to talk. It is only after one or two days that they realised that all their attacks against us had failed." Revealing details of the night of the first airstrikes on May 7, the CDS said, "We did it from 11.05pm to about 1.30am, and five minutes later we rang the director general of military operations to say that we've done this, we hit only terror targets, that military establishments are out of the purview of the strikes, and we ensured that there was no collateral damage to civilians. We need to talk to each other." The CDS said war has expanded into space, cyberspace, the electromagnetic domain, etc. "A lot of activities took place between both of us for four days in the electromagnetic domain. Interactivity also took place in the cyber domain. We also had a lot of activity in the domain of perception management, information, or maybe you can call it cognitive warfare, in which shaping the mind of the people is more important than the landscape. "
