r2i forum

Hello,
What is the rule on SS taxes withholding for a USC working in India for an Indian subsidiary of a US company?

I tried to get information from IRS site but it was not very clear...

Any responses will be helpful.

Thanks.

SS Taxes are on US EARNED income. Any income earned in India (even if you are a USC working for a client/employer based in the US and are on their US payroll, it is still Indian income because you earned that $ while sitting in India) is not subject to SS Taxes.

Hello Vizagdesi,
Assuming it is done from US payroll, does this mean that he or she and the company has to contribute to the employee provident fund in India?

I am no expert in this area. But if the company does not pay you from the Indian entity, then the US parent company's profits are liable to be taxed by the GOI because they effective have operations in India (with you working from Indian soil).

I understand that may be the case for longer term, but will it apply for short term assignments like an year or two? As I am reading more on this subject, it almost looks like that US citizens on US payroll working India may have to pay both Social Security and Provident fund. This seems to be too much, but there does not seem to be any way around it. Our company is looking into the rules for provident fund to see if they follow the same resident rule for Indian taxes. As talked in other threads, the Indian taxes only apply if the stay exceeds 183 days in any tax year, but the question is it the same rule for PF. If so, one can do two six month assignments in two consecutive years with few months break in between w/o worrying about India taxes and PF. It looks good in theory, but as our company is big, they are doing their due diligence.

vizagdesi;275661SS Taxes are on US EARNED income. Any income earned in India (even if you are a USC working for a client/employer based in the US and are on their US payroll, it is still Indian income because you earned that $ while sitting in India) is not subject to SS Taxes.

If the Indian earned income (for USC and GC) is from self-employment, then it seems SS taxes are due on that income. This is what I learn from other threads. It is strange because:

- If I am employed by a company, I do not owe SS taxes
- If I am self-employed, then I owe full 15.3% SS taxes!

"Wages paid to U.S. citizens and resident aliens employed outside the United States are generally subject to Social Security And Medicare tax if the employer is an American employer. "

I believe if you work for indian subsidiary owned by indian then they might not have to deduct social security taxes. Please read following links.

http://www.irs.gov/businesses/small/international/article/0,,id=105249,00.html
and
http://www.irs.gov/publications/p15/ar02.html#en_US_publink1000202554