The Covid-19 pandemic has wreaked havoc on salaried employees since 2020. Employees not only had to spend more money to protect themselves and their families from Covid-19 but they were also required to incur other expenditures like internet and phone charges, furniture to set up a home office, extra power bills and so on.
Prior to the pandemic, employees did not have to worry about these charges because the office provided all required items for work. Salaried employees are expecting that the government will announce a Work From Home Allowance in Budget 2022 which will provide tax relief on expenditure incurred while working from home during the pandemic.
The government may be inspired by countries such as the United Kingdom, where salaried employees receive a set rate of GBP 6 per week in tax relief for increased household expenditure if they must work from home.
“Considering the current situation, employees are working from home across businesses. Employees are likely to incur additional ‘work from home’ – related expenditure, such as internet charges, rent, electricity, furniture, etc., and therefore, employers would need to provide allowances to meet these expenditures,” Deloitte India noted in its Pre-Budget Expectations 2022.
“It is recommended that an additional deduction of ‘work from home’ allowance of INR 50,000 be given to employees who are working from home,” Deloitte India recommended.
In its pre-Budget memorandum, the Institute of Chartered Accountants of India (ICAI) also suggested the government provide tax relief on work from home expenses. “It is suggested that expenses incurred towards furniture/other set-up costs may be specifically exempted,” the ICAI said.
According to the ICAI, tax exemption should be provided because the “provision of desk, chairs and other set up at employees’ residence in light of work from home could be taxed as perquisite in the hands of the employees.”
It has also been recommended that the government should raise the standard deduction under Section 16 of the Income Tax Act from Rs 50,000 to Rs 1 lakh.
“It is suggested that the standard deduction u/s 16 may be enhanced to at least Rs. 100,000 to ease the tax burden of the employees and keeping in mind the rate of inflation and purchasing power of the salaried individual and rather it be linked to cost inflation index for regular enhancement in deduction amount similar to that available for income under the head capital gains,” ICAI said.