Social Security Pact between India and US a necessity: IACC

New Delhi, Nov 8 (UNI) The Indo-American Chamber of Commerce (IACC) today urged the Centre to take steps for signing a social security pact with US Administration to give tax relief to increasing number of Indians working in the US on short-term visa.

The pact, when siged, will eliminate double taxation towards social security in India and the US, giving relief to Indian professionals working on short-term assignments there.

According to estimates, contributions of Indian professionals on short-term contracts in the US are as high as one billion dollars annually.

The proposal assumes importance since it has come close on the heels of the recent treaty India signed with Belgium.

''The treaty should envisage avoidance of double taxation of social security both in the home and host countries for professionals working on short-term visa. Once such a treaty is signed the professionals will be required to pay social security taxes only in the home country, helping thousands of Indian professionals working in the US on short term assignments,'' IACC President Deepak Pahwa said.

The US has signed such treaties with several other countries.

Most Indian professionals working in the US are on short term visa, up to a maximum of five years, and therefore are not able to meet the stipulation of 10 years set by the US Government to derive the benefits of this scheme.

There is also a difference in semantics of taxation as in the US any deduction from the salary of an employee for social security is termed as a tax, whereas in India, contributions towards Provident Fund, Gratuity and other superannuating benefits are not treated as taxes but as mere contributions, though the employees are the ultimate beneficiaries.

Mr Pahwa said not only does this lead to double taxation towards social security, but the benefits of the taxation in the US are not made available to most taxpayers.

The IACC demanded that the two countries should reach a mutual agreement so that Indian professionals can take advantage of double taxation avoidance rules.

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