A foreign national working in India for a covered establishment is generally an international worker under the Employees' Provident Fund rules, contributing on the full salary with no wage ceiling. For Japanese employees there is a major exception: a worker who stays covered by the Japanese pension system under the Japan-India Social Security Agreement and holds a Certificate of Coverage is treated as an excluded employee.
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Key facts
| Who is an international worker | A foreign national working for a covered establishment in India, and certain Indian workers with foreign links as defined |
|---|---|
| Wage ceiling | None for international workers; Indian employees above the prescribed wage ceiling are generally not mandatorily covered |
| Exclusion for Japanese workers | Covered by the Japan-India Social Security Agreement with a valid Certificate of Coverage |
| Withdrawal | Rules differ from domestic members; the Japan agreement allows withdrawal on retirement or resignation in India whatever the age, per Japanese commentary |
| Courts | Karnataka High Court struck down the provisions in 2024; Delhi High Court upheld them on 4 November 2025 |
| Rulebook | Employees' Provident Funds Scheme, 2026, which took effect on 1 July 2026, per law-firm commentary |
Who counts as an international worker
The EPF rules treat foreign nationals employed in India by a covered establishment as international workers. Unlike Indian employees, who are mandatorily covered only up to a prescribed wage ceiling, international workers contribute on their whole salary. An Indian subsidiary of a Japanese company that is covered by the EPF law therefore has to register its Japanese expats, unless they are excluded employees.
The Japanese exception
Under the Japan-India Social Security Agreement, a Japanese employee sent to India by a Japanese employer can remain in the Japanese pension system for an initial five years. With a valid Certificate of Coverage, the person is an excluded employee and does not contribute to Indian EPF or EPS for that period. See the agreement.
- No certificate, or a certificate that has expired: the international worker rules apply.
- Employed by the Indian subsidiary rather than sent by the Japanese employer: the detached worker rule may not apply.
- Assignment longer than the period on the certificate: apply for an extension before it ends.
How contributions work when the exception does not apply
- The employer and the employee each contribute a percentage of wages, as the Scheme sets, with no ceiling for international workers.
- The employer adds administration charges.
- The contributions are reported and paid monthly through the EPFO system, like those of Indian employees.
What the courts have said
| Court | Outcome |
|---|---|
| Karnataka High Court (2024), Stone Hill Education Foundation v. Union of India | Held the international worker provisions unconstitutional for requiring contributions on full salary without a ceiling |
| Delhi High Court (4 November 2025), SpiceJet Limited and LG Electronics India v. Union of India | Upheld the provisions; a wage ceiling is a legislative choice. Non-excluded international workers must contribute |
| Supreme Court | We are not aware of a final ruling. Check the current position |
The two High Courts disagree, and the Employees' Provident Funds Scheme, 2026 retains a framework for international workers. For Japanese expats with a Certificate of Coverage the dispute does not arise, which is another reason to obtain it.
Employer checklist
- Confirm that the establishment is covered by the EPF law and registered with the EPFO.
- Identify every foreign national on payroll and classify them as international workers or excluded employees.
- Obtain and file a copy of each Japanese expat's Certificate of Coverage before the first payroll.
- For anyone without a certificate, decide with advice how to handle the court position and keep the file note.
- Report and pay each month, keep records for inspection and diary certificate expiry dates.
What this means for a Japanese parent
- Budget for the employer contribution on the full salary for any expat who does not qualify for the exclusion.
- Keep the Certificate of Coverage with the payroll file. An EPFO inspector will ask for it.
Mistakes to avoid
- Putting Japanese expats on provident fund payroll when a Certificate of Coverage was available.
- Leaving them off provident fund payroll without a certificate or a written legal basis.
- Letting a certificate expire without an extension.
- Telling an expat they can withdraw on return to Japan without checking the current rule.
How AU Corporate handles this
We run payroll and provident fund compliance for foreign nationals, classify international workers and excluded employees and advise on the current position.
Related services: HR and payroll
Official sources
Rules on this page can be verified at the primary sources: the Employees' Provident Fund Organisation, the Ministry of Labour and Employment and the Japan Pension Service.
Frequently asked questions
Does a Japanese citizen in India have to contribute to provident fund?
Generally yes as an international worker of a covered establishment, unless the person is covered by the Japan-India Social Security Agreement and holds a Certificate of Coverage.
Is there a wage ceiling for international workers?
No. International workers contribute on their whole salary, although Indian employees are mandatorily covered only up to a prescribed ceiling.
What is an excluded employee?
A worker who stays covered by the home country's social security under an agreement with India and holds a valid Certificate of Coverage.
Does a local hire by the Indian subsidiary qualify for the exclusion?
Generally not, because the detached worker rule is for employees sent by an employer in the home country.
Did a court strike down the rule?
The Karnataka High Court did in 2024. The Delhi High Court upheld the provisions on 4 November 2025. We are not aware of a final Supreme Court ruling.
Does an Employer of Record avoid Indian provident fund?
No. The EOR is the employer and the provident fund rules apply to the worker, subject to any exclusion.
What is the EPF Scheme, 2026?
The current provident fund scheme, which took effect on 1 July 2026 per law-firm commentary, and retains provisions for international workers.
What if we have not been contributing?
Take advice quickly. Arrears, interest and damages can apply, and there are routes to regularize.
Related guides
The Japan-India Social Security Agreement: Detached Workers, Certificate of Coverage and Totalization
How the Japan-India Social Security Agreement works: detached workers, five-year coverage, Certificate of Coverage, pension systems covered and totalization.
Read the guide →Hiring and Payroll in India for Japanese Companies: Contracts, PF, ESI and Gratuity
How Japanese companies hire in India: employment contracts, provident fund, ESI, gratuity, professional tax, payroll steps and India's labour codes.
Read the guide →Employer of Record vs. Subsidiary in India: When to Use Each
Compare an Employer of Record with your own Indian subsidiary: speed, control, compliance, tax presence and when to convert. A guide for Japanese companies.
Read the guide →Sending a Japanese Executive to India: Visa, Housing, Banking and Tax
How to relocate a Japanese executive to India: employment visa, FRRO registration, housing, banking, tax residency and permanent establishment risk for the parent.
Read the guide →Sources
Last updated 20 October 2026. General information only, not legal or tax advice. Indian rules change often; confirm current requirements before acting.