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Experts tell Indians abroad how to limit exit tax losses
Indian professionals working overseas risk losing billions of dollars in social-security contributions when returning home, a loss often called an 'exit tax', though it is not a tax but forfeited deferred pay. Senior economist Mitali Nikore told Times Now Digital that the decisive steps to limit these losses must be taken years before departure, not in the final month before moving.
In the US, workers pay 7.65% of each salary into a system that yields nothing unless they stay ten years, with no India-US totalisation agreement, Indian workers forfeit $3, 3.5 billion annually. Germany refunds only the worker's own contributions and only if they leave before five years, while the employer's 9.3% share is lost. Britain removes personal allowances for non-resident Indians and can extend inheritance tax obligations for up to a decade after departure.
Nikore advises returnees to keep tax filings spotless, count accrued quarters of social-security entitlement, collect employment records while still employed, time the move to maximise India's RNOR tax-residency window, and redesignate bank accounts on arrival. A January-to-March return can stretch that window to three years against two for an April move.
Indian Opinion Analysis
The 'exit tax' is not a single levy but a patchwork of national social-security and inheritance rules that trap contributions Indian workers make abroad. Without a totalisation agreement, years of payroll deductions in the US, Germany or Britain can vanish on return. The sums are large: Indian workers in the US alone forfeit an estimated $3, 3.5 billion annually. The realistic fix remains bilateral: India has totalisation pacts with only 22 countries, none with the US. A formal agreement would let workers combine contribution periods across both systems. Until then, the RNOR (Resident but Not Ordinarily Resident) window under the Income Tax Act, which can stretch to three years depending on the month of return, is the main legal lever available to returnees.
Source: timesnownews.com
This story was synthesised by AI from the source linked above. Methodology and corrections.
