An Indian employee going abroad on an assignment may need to contribute to the host countrys social security. Such contributions turn out to be an additional cost for the employer. To mitigate this additional cost, a CoC may be obtained from the Indian Provident Fund office, which allows an exemption to be claimed from the host countrys social security. The CoC can, however, be obtained only where an employee goes to a country with which India has entered into a social security agreement.
A CoC from the Indian Provident Fund office is thus a ticket for an employee to claim exemptions from the host countrys social security. In India, a major challenge that was faced by an employer was the considerable time taken by the Provident Fund office to issue a CoC. Another common challenge was the incorrect details mentioned by the Provident Fund office on the CoC. These challenges were largely due to the old CoC application process.
Under the old process, a blank application form was required to be downloaded from the website of Indian Provident Fund office. This was then filled and signed, both by the employer and the employee. The form, along with supporting documents, was filed with the regional Provident Fund office. The data, as per the application form, was then manually entered by the regional Provident Fund offices in their system and CoC was issued.
Thankfully, the Indian Provident Fund office has now recognised the challenges with the old process. The CoC application process has been significantly simplified with introduction of an online tool. Requisite details will need to be entered into the online tool in a soft format. The data so entered will be converted into a printable file.
Once signed by the employer and the employee, the application will need to be filed with the regional Provident Fund office, along with supporting documents, and, then, the CoC will be issued.
A great advantage of the online tool is that the regional Provident Fund offices will not be required to fill the details manually into their system. The details submitted through the online tool will be automatically transferred to the CoC, thereby reducing the processing time and errors in the CoC. The Provident Fund head office has, in fact, instructed its regional offices to issue CoCs under the online tool within three working days.
However, the online tool still has some open issues such as lack of a self-check facility for checking any errors in the details submitted in the online tool. The Provident Fund office has issued no guidance on the supporting documentation to be filed along with CoC application and the effective date of the implementation of the online tool. Also, the experience so far has been that the online tool is slow takes a lot of time for the application to be submitted.
One is always resistant to change, but a change which makes a critical compliance process efficient and effective is always welcome. It is expected that the Indian Provident Fund office will continue to take such steps to make the compliance process simpler.
The writer is senior tax professional, EY. Views expressed are personal