Indian professionals taking up short-term assignments in the United Kingdom are set to receive a major social security benefit from 15 July, when the India-UK Free Trade Agreement (FTA) and the accompanying Double Contribution Convention (DCC) come into effect.
Union Commerce and Industry Minister Piyush Goyal said the agreement will not only make Indian exports duty-free in the UK but will also ensure that many Indian professionals working in the UK for a limited period no longer lose a significant portion of their salary towards social security contributions without receiving any long-term benefit.
What changes from 15 July?
Goyal said that the FTA will become operational from 15 July. The minister also highlighted the implementation of the Double Contribution Convention Agreement from the same date.
“Regarding our young men and women who go there to work–often for two, three, or five years… previously, about 25 per cent of their salary was effectively wasted; the local government would take it, and the worker received no benefit from it. Now, we have finalised a Double Contribution Convention Agreement that will also come into effect on the 15th,” he said.
According to Goyal, Indians going to the UK for work for up to five years will no longer lose that contribution.
As per the EY report, Indian nationals working in the UK are currently required to contribute to the UK’s National Insurance Contributions (NIC).
However, those staying in the country for less than 10 years generally do not qualify for UK state pension benefits, meaning a large part of their contributions may not translate into retirement benefits.
How will Indian workers benefit from this agreement?
The Double Contribution Convention is designed to prevent Indian professionals on short-term assignments in the UK from making social security contributions in both countries, reducing their employment costs and improving their long-term retirement savings.
“For Indians going there to work in the services sector or other jobs for up to five years, the 25 per cent of their salary that the local government previously took will now be deposited into their Provident Fund accounts in India. That money will belong to them,” Goyal mentioned.
The accumulated EPF corpus will continue to grow even during the employee’s overseas assignment, helping build a larger retirement fund in India.
“It earns 8.25 per cent tax-free interest and serves as a support for their old age, ensuring social security for their families,” he added.
“I believe it is a testament to Prime Minister Narendra Modi’s able leadership that the UK-India Free Trade Agreement not only addresses merchandise and goods and boosts the services sector, but also brings a significant gift for the thousands of people working and providing services there,” he said.