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The Economic Times
Tuesday, September 30, 2003| Updated at 21:36 hrs IST
http://economictimes.indiatimes.com/...500046&sType=1
H1-B visa holders may not have to pay social security tax soon
JAMES MATHEW & KRISHNA KANT
TIMES NEWS NETWORK[ FRIDAY, OCTOBER 18, 2002 12:55:44 AM ]
NEW DELHI: There is good news for all those who are there in the US on a H1-B visa. India is close to signing the administrative protocol with the US on abolishing social security tax charged by the US administration on those H-1B visa holders.
The administrative protocol is the first step towards India being able to sign the final agreement with the US government on the withdrawal of the tax on large number of Indians, estimated to be about 60,000 to 70,000 at any point of time, on short-term employment visas in the United States.
The waiver on the tax-charged currently at the rate of 17% to 21.5% of their total salaries-could result in savings of billions of dollars annually. A person has to work for at least 10 years in the US to take full benefits from his social security taxes. H1-B visa on the other hand is for a maximum period of six years.
According to sources, the ministries of external affairs, finance, labour and commerce have already agreed on the draft agreement on the protocol to be signed with the US.
After the signing of the protocol it has to be ratified by the two countries before the two governments start negotiations on the final agreement. From the Indian side, the ministry of labour is the nodal agency for the negotiations on the final treaty to be signed between the two countries. US has a similar agreement with 20 other countries, including Germany, the UK and Japan.
For the US to waive social security taxes, the domestic country should have a social security system. Indian officials in their negotiations with their US counterparts have pointed towards the existence of social security benefits like employee provident fund, Employee State Insurance medical facility and limited unemployment benefits in India.
Besides directly benefiting engineers, who form the largest chunk of H1-B visa holders, the agreement would benefit students, academicians and other professionals on short-term deputation.
The matter has seen hectic parleys between the various industry chambers and the government. The Indo-American Chamber of Commerce, a bilateral chamber, is particularly lobbying hard with both the governments for an early signing of the final agreement between the two countries.
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