India-UK DCC: Will your EPF balance increase under the new social security pact?

The India-UK Double Contributions Convention (DCC), which comes into effect alongside the free trade agreement from July 15, promises social security relief for eligible Indian employees working in the UK. The benefit applies to "detached workers", employees already working for an India-based employer who are temporarily sent to the UK for up to 60 months. It does not apply to Indians who move to the UK and take up local employment.

What is the Double Contributions Convention (DCC)?

The Double Contributions Convention (DCC) is a reciprocal social security agreement between India and the UK. Its primary objective is to ensure that eligible employees and their employers pay social security contributions in only one country at a time, preventing double contributions.

What did the minister say?

Announcing the implementation of the India-UK free trade agreement, Union Commerce and Industry Minister Piyush Goyal said the DCC would benefit thousands of Indians working in the UK.

"Earlier, nearly 25 per cent of their salaries used to go towards the UK government's social security contributions. Now, that amount will be deposited in their provident fund accounts in India, earning 8.25 per cent annual interest. It will remain tax-free and help secure their retirement savings," Goyal said, PTI reported.

According to the minister, eligible Indian professionals temporarily deputed to the UK for up to five years will not have to contribute to the British social security system.

Will your EPF corpus grow?

According to the UK government, eligible detached workers temporarily working in the UK will continue paying social security contributions into India's Employees' Provident Fund (EPF) scheme instead of paying UK National Insurance Contributions (NICs).

According to tax expert Balwant Jain, eligible employees and their employers will continue contributing to EPF.

"Since the detached employee and his employer will continue to contribute to his Indian EPF, he will have a larger EPF corpus and higher EPS eligibility," Jain said.

However, while eligible Indian workers will continue contributing to India's social security system, they will not build entitlement to the UK State Pension or other UK contributory benefits during the exemption period.

The arrangement is reciprocal, allowing UK employees temporarily deputed to India to continue paying social security contributions in the UK.

India has already signed similar social security agreements with several countries, including France, Germany, Belgium, Denmark, Switzerland, the Netherlands, and South Korea.