UK-India Free Trade Agreement Paves the Way for Indian Professionals
Hyderabad, 8th May 2025: In a significant development that could reshape the financial landscape for Indian professionals working abroad, the recently signed UK-India Free Trade Agreement (FTA) brings long-awaited relief. Under the agreement, Indian professionals stationed in the United Kingdom are exempt from paying National Insurance contributions for up to three years. This exemption aims to reduce the financial burden on Indian workers who often find themselves contributing substantial amounts to foreign social security systems without reaping the corresponding benefits.
The announcement is being viewed as a potential precursor to similar arrangements with other countries, notably the United States, where Indian H-1B visa holders face steep social security tax deductions without any guaranteed returns. This issue has been a longstanding point of contention for Indian professionals, who have collectively lost over $1 billion to social security taxes in the United States.
A Step Towards Fairness
The UK-India FTA marks the first instance of a European nation exempting Indian professionals from social security contributions, offering a model that could inspire the United States to reconsider its current policies for H-1B visa holders. Typically, H-1B professionals in the U.S. are required to pay into Social Security and Medicare, even if they do not reside in the country long enough to qualify for benefits. These mandatory deductions can amount to significant losses, given that many Indian professionals return home before meeting the 10-year threshold required to access U.S. social security benefits.
Speaking Sudhir Kumar, an IT consultant based in London, remarked, “The exemption is a massive relief for us. It not only reduces our tax liabilities but also recognizes our contribution to the economy. I hope the U.S. follows suit; it’s long overdue.“
Implications for the United States
The situation in the United States is starkly different. Indian H-1B visa holders contribute billions of dollars to Social Security and Medicare without the promise of receiving any benefits. According to a 2023 report by the Migration Policy Institute, Indian nationals make up nearly 74% of H-1B visa holders in the U.S. Despite their significant contributions, many return to India before they can claim social security benefits, resulting in a financial loss estimated at over $1 billion annually.
Indian advocacy groups have long been lobbying for a Totalization Agreement between India and the United States, which would allow Indian professionals to either reclaim their contributions or have them transferred to India’s social security system. Although the proposal has been discussed during multiple high-level meetings, it remains stalled due to legal and diplomatic challenges.
The success of the UK-India FTA could breathe new life into these discussions. Experts believe that the U.S. may feel pressured to reconsider its stance, especially as the global workforce becomes increasingly interconnected and mobile.
A Global Precedent?
The agreement with the UK may also prompt other countries hosting large numbers of Indian professionals to revisit their policies. Countries such as Germany, Canada, and Australia have similarly high social security deductions that go unclaimed by short-term professionals. “This could set a global precedent for how nations treat foreign workers. India’s negotiation with the UK is a template that can be replicated with other countries,” noted Rajiv Mehta, an international trade analyst based in New Delhi.
Industry leaders are optimistic that this could also spur the U.S. to initiate similar talks, given the high number of Indian professionals employed in technology, healthcare, and research sectors. “If the U.S. wants to remain competitive and continue attracting global talent, this is an area that cannot be ignored,” Mehta added.
Challenges Ahead
Despite optimism, challenges remain. The U.S. has been hesitant to negotiate Totalization Agreements, citing concerns about financial losses and administrative hurdles. Previous attempts to secure a deal with India have been stalled due to disagreements over benefit portability and eligibility criteria.
However, with the success of the UK-India deal, there is growing pressure on the U.S. administration to at least revisit the discussion. Indian professionals remain hopeful that their collective voice, coupled with India’s growing influence in global trade negotiations, will prompt the U.S. to consider new policies that acknowledge their contributions.
Looking Forward
The UK-India FTA serves as a landmark in international worker rights, potentially paving the way for fairer treatment of expatriate professionals worldwide. For Indian H-1B holders in the United States, it represents a beacon of hope that their financial contributions may one day be recognized and rightfully returned. Until then, advocacy groups and industry leaders continue to press for change, armed with a fresh example of what international cooperation can achieve.
