Provident Fund for an American Working in India

[leprechaunsel]

I'm starting an assignment for work that will have me in India for the next two years. With this, the company mentioned I will be paying taxes for the Provident Fund that they will match. My understanding is it is India's version of what we call Social Security in the US. Is anyone familiar with how this works for those who are not Indian citizens and can help me with the below?

Is this something I can collect only when I turn 59 or can I collect when I leave India?

My understanding is that it is 12%, is this on my pre tax salary or post tax salary? Is there a cap?

Is the money invested? Is it something that I will have to select particular investments?

Thanks so much for your help!

 

[esta]

@leprechaunsel Let me give you some help on this.

Providend fund or PF is similar to your US savings in basic sense. However, don't expect any other frills like health cover etc. from government post 60 etc.

It is about 12% of your pre-tax basic salary. (Basic is a component written in your salary slip. It will be about 12% of that). Essentially company will also contribute the same amount to your retirals (PF +/- PENSION corpus). Hence 24% of basic goes there (12% yours and 12% employer's)

Usually you can only collect it at your retirement (60 years of age), however you can in rare circumstances take it before, the process is tedious. some examples are-

• Building house
• Marrying children
• Being unemployed for 6+ months
• Medical reasons etc.

Regarding how it will work in your case, I am afraid you may have to seek a CA (chartered accountant) or a fee only SEBI registered financial advisor for more clarity.

However, in case this is your first job, you may want to talk to your HR about how and where is this fund being stored i.e. in PF office or your company's trust ? In any case you need to have your own UAN (Universal Account Number) opened and activated on EPFO (employee providend fund organisation) website.

Also the money is invested in something similar to a government security / bond whose rate of interest is declared annually by the government (currently around 8.5-8.75% per annum).

Feel free to pm in case you require more help.