Efforts on to reduce tax burden for IT companies in US

Even as America’s new Border Security Act raises hackles in India, government officials said the country will renew efforts to push for exemption of social security tax paid by top tech firms including TCS, Infosys and Wipro in the US. 

India’s $50-billion software outsourcing industry pays around $1 billion every year towards social security taxes to the US government, according to Nasscom. 

“This contribution by Indian companies and the employees on short-term deputation in the US amounts to double taxation, since they are also making the same contributions at home. Since the term of the H1B and L1 visas are 6 and 7 years, respectively, these employees cannot avail themselves of the social security benefits,” said minister of overseas Indian affairs Vayalar Ravi. 

US law prescribes a minimum qualifying period of 10 years in order to be eligible for pension. Employers and employees have to contribute 7.65% each of the salary towards social security. “Our ministry has been talking to the US government for many months now on finalising the SSA since it will reduce the burden on Indian companies and will greatly benefit individual workers through totalisation,” he added. 

Over past three years India has been pushing for the agreement that will allow workers from both the countries working on short-term contracts to be exempted from contributing towards social security in their guest country. India already has such agreements with Belgium, France, Germany, Switzerland, the Netherlands, Hungary, Denmark and Luxembourg. The social security agreement with Canada is ready to be signed. 

“The totalisation agreement will benefit IT companies of both countries. Hopefully, we will be able to get implemented soon,” said TV Mohandas Pai, HR head and member of the board, Infosys. 

“Totalisation agreement should not be viewed in light of the recent H1 visa fee hike issue. With US, it’s been a long-standing demand from the industry. The agreement will benefit citizens of both countries,” said Nasscom V-P Ameet Nivsarkar. 

The minister, however, suggested that the talks with the US on this issue were inconclusive so far, and there were no indications from the PMO that the issue would feature on the agenda during US President Barack Obama’s upcoming visit– despite as many 150,000 temporary Indian workers in the US and 25,000 such American workers in India. Meanwhile, responding to reports that India may go to the WTO on the issue of the border act, the State Department spokesperson Mark Toner said on Wednesday that the United States hopes this issue would not affect the long-term economic partnership.