Ever since the outbreak of coronavirus pandemic, work from home has become quite a norm. While salaried employees are happy that working from home is saving a lot of cost for them, but they might soon land in trouble. Here, we are not talking about physical trouble but the financial one. Working from the home strategy is all set to squeeze your pockets as your tax liability for this year may see a spike.
According to the tax experts, salary components like conveyance allowance and Leave Travel Allowance (LTA) may become taxable for not employees who have actually not spend any amount on these heads as they are working from home.
In another jolt, conveyance allowance can no longer be tax-free as employees are not commuting to their office on a daily basis. When conveyance allowance is offered as a reimbursement it becomes tax-free only if you actually incur the expense and produce proofs for the same. So, in the absence of any official commute, conveyance allowance may become taxable.
Amidst the pandemic, you may not be able to take a vacation and claim LTA for the current financial year. Hence, LTA may also become taxable. Notably, LTA can be claimed twice in a block of four years.
Many employees have vacated their rented house and moved to their home town to save on rent due to the work-from-home. Since they are no longer paying any rent, HRA will be taxable, say, tax experts.
Further, many companies are giving their employees a fixed amount as a work-from-home allowance to meet expenses like internet bills, electricity charges, cost of buying laptops, and office furniture for creating an office set up at home and does not require you to produce bills for the same. In such a case, the amount will be taxable in the hands of employees.
Also Read: IT services, RIL among beneficiaries as digital dominates India Inc's commentary
According to a report published by a media house, tax and HR experts are looking for ways to help employees minimize the impact by restructuring salaries. “We have been receiving increased inquiries from HR departments of various companies seeking guidance on how they can help their employees reduce their tax burden,” ClearTax founder and CEO Archit Gupta told the publication. “The government can also look at some sort of relief to avoid salaried class facing large tax bills due to the new remote work mechanism.”
Randstad India chief people officer Anjali Raghuvanshi said that restructuring salary components may not help at this stage without a structural change in tax laws. “For now, companies are sticking to providing separate WFH allowances in the nature of reimbursements,” she said.