Home >Budget >Budget Expectations >Budget 2021: Govt may consider tax deduction for employees working from home

The government could look at providing deductions for expenses incurred by salaried employees while working from home in the upcoming Budget 2021. In the wake of coronavirus pandemic, work from home has become the new normal. From India Inc to information technology (IT) giants —the companies have adopted remote working policy in the last one year to prevent the virus spread. Now, setting up a work station at home, needs certain investments. Moreover, the allowances received by the employees such as conveyance allowance, have become taxable in its entirety for those who are working from home. Anyone whose cost to company has one or more allowances like house rent allowance, uniform allowance, travel allowance, meal coupons or vouchers etc will have to pay higher taxes on their income while working remotely.

"One clear thinking is at the level of small to medium taxpayer can we look at, in view of the COVID-19, a deduction to them particularly for salaried employees when they work from home," said Rahul Garg, senior tax partner, Pwc India.

'So whatever expenditure they are incurring working from home, which expenditure in the typical case would have been incurred in office by their employers if they were using offices to work if you allow that to be treated as giving them an entitlement for deduction and that saves tax for them. It will leave more money in their hands,' Garg said.

Garg said such a measure would be 'reasonably equitable' because if businesses were to incur that expense, that would have been a deductible expenditure in their books.

Today that deductible expenditure sits in the hand of the individual and therefore there is no tax base reduction or sacrifice of any revenue, he said.

'It creates a situation of shifting the money in the hands of individual by giving a concession or deduction in respect to COVID-19 related expenses and they could look at few thousand rupees per month and every person who is employed can get deduction and tax relief in their hand and contribute to demand creation,' Garg noted.

"On account of work from home due to COVID-19 induced lockdown, people had to incur additional expenses due to remote working. Many companies did reimburse this amount; however, the employees are required to pay taxes on such reimbursements also," said Pranjal Kamra, chief executive officer, Finology adding, "Therefore the people could expect the government to allow some form of rebate or deductions on taxes for such additional expenses,"

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