Budget 2022: Remote working allowances salaried class expects

Businesses are now looking at remote working as a feasible long-term solution, either for all the working days or under a hybrid model. Remote working is a convenient option, but it requires investments on the part of employees like establishing a power backup facility, broadband connection, purchase of office infrastructure etc. 

Further, there are recurring expenses on electricity, broadband charges, maintenance of premises etc. To cover such costs, some companies have granted allowances while a few others are reimbursing the expenditure upon production of actual bills incurred for undertaking official duties. 

Also Read: 2 in 3 favour mandatory work from home amid Omicron surge: Study

Need for specific exemption

As per the extant tax law, certain allowances granted by employers are fully taxable in the hands of the employees as perquisites. In case of reimbursement mechanism, it may be construed that cost of expense are not taxable in the hands of employees subject to it being inextricably linked for the purposes of business of the employer. 

However, the tax officer may disregard this view and consider said reimbursements as taxable income. Given the ambiguity of the tax treatment, a clarification issued would unburden employees. 

Expectation from Union Budget 2022

• For investments in setting up home offices: It is highly recommended that an exemption should be provided to employees for amounts spent on set up of home office infrastructure - chairs, desk, Wi-Fi network etc. which can be claimed once in a two or four-year window starting from April 2022. 

The exemption could have an upper limit (say Rs 50,000) and can be claimed through the employer, upon submission of documents relating to purchases made for carrying out official work. There may be clarification brought in for expenses incurred during the past year, i.e. since the onset of the pandemic.  

• For recurring expenses: For recurring nature of expenses such as electricity charges, broadband charges, maintenance of premises etc., a scheme can be formulated specifying: 

1. An additional standard deduction of Rs 3,000 per month for the duration of work from home (WFH), without the need to produce any bills; or 
2. A deduction allowance on the basis of the actual amount incurred upon production of bills, subject to a maximum limit (say Rs 3,500 per month). 

Further, to regulate the claims of employees, it can be mentioned that the above deductions/exemptions should be available to such employees who are covered by the remote working policy of employers irrespective of employees availing the new tax regime which do not allow for exemptions/deductions. 

Also Read: Union Budget 2022: Wishlist of individual taxpayers

The provisions can explicitly provide that, employees shall be eligible for the deduction if the below-mentioned conditions are satisfied:

 

• Designated expenditure should strictly be incurred for purchase of office infrastructure necessary for conduct of official duties; 
• Such expenditure should be incurred while employees were mandatorily required to work from home; 
• Employees need to submit proof of expenses incurred to their employers for claiming deduction; 
• Deduction shall be available only if the claim is made through the employer, and not at the time of filing the income tax return. 

 As we are approaching the Budget session, it would be interesting to see the fine print on how the expectations of the salaried class are met. 
 
(This article has been contributed by Sridhar R, Partner, Grant Thornton Bharat LLP with inputs from CA Sudeep Das, CA Ridhi Sanghvi and CA Aditya Goyal.)