India`s Totalization Agreement with the US: What You Need to Know
India has been negotiating a Totalization Agreement with the United States for years – and finally, on August 31, 2021, the two countries signed a memorandum of understanding to this effect. But what exactly does this mean for Indians living and working in the US, or for American citizens working in India? Here`s everything you need to know about India`s Totalization Agreement with the US.
What is a Totalization Agreement?
A Totalization Agreement is a treaty between two countries that aims to eliminate dual Social Security taxation and protect the benefit rights of workers who move between the two countries. Simply put, when someone works in a foreign country, they are usually required to pay into that country`s Social Security system. But they may also be required to continue paying into their home country`s Social Security system, depending on the laws of both countries. This can result in double taxation – and in some cases, workers may not be able to receive benefits from either country`s Social Security system.
A Totalization Agreement aims to prevent this by allowing workers to ”totalize” their contributions – that is, to combine the credits earned in both countries in order to qualify for benefits in either country.
India`s Totalization Agreement with the US
India has been negotiating a Totalization Agreement with the US since 2007, but progress has been slow due to various issues, including concerns over data privacy and intellectual property rights. However, on August 31, 2021, the two countries signed a memorandum of understanding on the subject, indicating that they are moving closer to a final agreement.
The agreement, if finalized, would benefit thousands of Indians living and working in the US, as well as American citizens working in India. It would allow these workers to totalize their contributions to both countries` Social Security systems, making it easier for them to qualify for benefits.
What are the Benefits of a Totalization Agreement?
A Totalization Agreement can have several benefits for workers who move between two countries:
– Elimination of dual taxation: A Totalization Agreement can eliminate the need for workers to pay into both countries` Social Security systems, which can result in significant cost savings.
– Protection of benefit rights: Workers who contribute to both countries` systems can qualify for benefits in either country, even if they don`t meet the minimum contribution requirements in one of the countries.
– Simplification of paperwork: Totalization Agreements can simplify the paperwork involved in applying for Social Security benefits, making it easier for workers to navigate the system.
– Increased mobility: Totalization Agreements can make it easier for workers to move between two countries without losing their Social Security benefits.
What`s Next for India`s Totalization Agreement with the US?
While the memorandum of understanding signed between India and the US is an important step towards a final Totalization Agreement, it`s important to note that the agreement has not yet been finalized. Both countries still need to work out the details of the agreement, and it may be several months (if not years) before a final agreement is reached.
However, the fact that India and the US have signed a memorandum of understanding on the subject is a positive sign, and suggests that both countries are committed to moving forward with the agreement. If and when a final agreement is reached, it will be a significant step forward for the thousands of workers who move between the two countries each year.