[2022]

134 taxmann.com 202 (Article)

[2022] 134 taxmann.com 202 (Article)

Date of Publishing: January 20, 2022

Expectations of the salaried individuals from Budget 2022

SUDEEP DAS RIDHI SANGHVI

CA CA

Background

Work from home (WFH)/ remote working has gained traction since March '20, owing to the pandemic,
which brought everything to a screeching halt. The WFH model which was initially adopted to prevent
virus spread, is now a more permanent work strategy followed by entities, owing to its benefits such as
zero commute costs/ time, super flexible work environment, savings in administrative costs etc.
However, the flipside provides challenges like weak/ unreliable internet connections, lack of
appropriate office infrastructure, unreasonable work-life balance and the issues around poor mental/
physical health among employees etc. The employees have been extremely agile to the ever-changing
work requirements and this is apparent from the increasing profits of India Inc., resulting in soaring tax
collections of the Government of India.

Businesses are now looking at WFH as a feasible solution for the foreseeable long-term, much in a
hybrid model. Although WFH is a convenient option for all stakeholders; but it requires investments on
the part of employees like establishing power backup facility, broadband/ internet connection, purchase
of office infrastructure etc. Further, there are recurring expenses on electricity, broadband charges,
maintenance of premises etc. To cover such costs on behalf of the employees, some companies have
granted allowances while few others are reimbursing actual expenditure upon production of bills.

Need for specific clarification in respect of the WFH allowances

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

Further, for most of the employees, the major chunk of recurring monthly costs are rental expense and
other fixed costs. As per the extant provisions of the income-tax law, employees are provided with
deduction for such rental expenses as per the prescribed computation mechanism.

Global perspective on WFH

From a global perspective, there are notable developments in some countries wherein tax deductions/
exemptions have been introduced as a relief measure. Few salient features are highlighted below:

♦ United Kingdom (UK) –

Employees in UK can claim tax relief for additional household costs if they have to mandatorily
work from home on a regular basis. The claim can be made for a fixed weekly amount for
duration of WFH or exact amounts incurred (supported by bills/ contracts).
♦ Australia–
Employees can claim deduction for expense incurred during WFH, if they are related to work.
The expenses on electricity charges, internet charges, consumables, home office equipment
(up to a certain limit) etc., can be claimed. Also, the law provides for various ways to claim
deduction like a fixed amount per hour for duration of WFH or basis the actual amount spent.
♦ Canada–
Similar to the above, the Revenue Authority of Canada provides for deduction either through a
flat rate method for number of days the employee was required to WFH or on the basis of
expenses incurred, subject to submission of required forms.
♦ Germany–
Employees who have switched to remote work are allowed to deduct EUR 5 for each calendar
day working from home and the total deduction is limited to EUR 600 per tax year.
Taking cues from the above, it's a reasonable ask from the Government of India to consider and
introduce provisions allowing specific deductions/ exemptions in respect of designated expenses.

Expectation from upcoming Union Budget 2022

WFH is undoubtedly the new normal, and it's reasonable to expect that some tax relief in this regard
should be provided to the salaried class. The salaried class expecting certain relief in the upcoming
Budget 2022, as enumerated below:
 ♦ Home office set up costs:
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 INR 50,000) and can be claimed through 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 since the onset of
pandemic.
♦ Meeting recurring expenses:
For recurring nature of expenses such as electricity charges, broadband/ internet charges,
maintenance of premises etc., a scheme can be formulated specifying:
• Additional standard deduction of INR 3,000 per month for duration of WFH, without the
need to produce any bills; and
• A deduction allowance on the basis of actual amount incurred upon production of bills,
subject to a maximum limit (say INR 3,500 per month).
Further, to regulate the claims of employees, it could be mentioned that the above deductions/
exemption should be available to such employees who are covered by the WFH policy of employers
irrespective of employees availing the tax regime (old v new). The provisions could explicitly provide for
employees be eligible for deduction only 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 WFH;
■ Employees need to submit proof of expenses incurred for claiming deduction to their
employers;
■ Deduction shall be available only if the claim is made through the employer, and not at the
 time of filing tax return.
As we approach the date of presenting of India Union budget for 2022-23, all eyes would be glued to
see the fine prints and how the expectations of the salaried class are provided for.

(with inputs from CA Aditya Goyal)

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