Budget 2022: Keeping Eyes Peeled For Tax Benefits On WFH Allowance

As hybrid and remote work become more commonplace, experts seek clarity from the Union Budget 2022 on tax implications for companies operating in SEZs and on WFH allowances. 

IT industry body Nasscom 

Emerging from the COVID-19 pandemic, the industry is implementing a hybrid working model where, unlike in the past, work will happen both on-site and remotely as a matter of routine. 

Earlier, this was considered a ‘temporary’ requirement but now it will just be a way of working. The industry is concerned that an aggressive interpretation of Section 10AA of the Income Tax Act could lead to instances where officials may consider that work done remotely by workers of the SEZ Unit is ineligible for the tax holiday. 

Clarify by way of explanation to the section that ‘Work from Home’ (WFH) by employees of Special Economic Zones (SEZ) unit would not affect the eligibility of tax holiday available under the section. The section allows taxpayers deductions for businesses established in SEZs.  

Mahesh Jaising, Partner, Deloitte 

As we emerge from the pandemic, many companies are exploring hybrid models, wherein employees will work both onsite and remotely. There is a need to explicitly recognise this model for Special Economic Zone units without any impact on indirect tax benefits claimed by the companies.

As employees are working from home across businesses, they are likely to incur additional Work from Home (WFH) related expenditures such as internet charges, rent, electricity, furniture, etc., and therefore, employers would need to provide allowances to meet these expenditures. 

In the UK, the government has provided a flat rate of GBP 6 per week of tax relief for additional household costs, if one has to work from home. It is recommended that an additional deduction of the WFH allowance of Rs 50,000 be given to employees who are working from home 

Lohit Bhatia, President- Workforce Management, Quess Corp 

As the COVID-19 pandemic and subsequent protocols have created an environment in which employees are today working from anywhere, they should be supplemented for additional expenses that are incurred while working from home, such as electrical expenses, internet and connectivity expenses, office furniture as well as a one-time setup cost. 

To address this one-time set-up cost, up to Rs 50,000 for the financial year can be provided and average support expenses up to Rs 5000 per month or Rs 60,000 per annum can be allocated as tax-deductible expenses over and above the section 80C.

Roopank Chaudhary, partner for human capital business at Aon 

Given the current situation of the pandemic and the medium to long term effectiveness and usage of hybrid/remote working models, WFH and its consequent financial impact on employees is clearly a big issue that may be addressed in the 2022 Union Budget. 

There could be a strong case for specific additional allowances for work from home-related expenses like office furniture, rent, broadband charges, better gadgets, or possibly a new deduction/tax relief for home office expenses in the budget. 

From a health and wellness standpoint, a higher medical cover for employees that covers both mental as well as physical health could be a welcome consideration as the long-term adverse impact of the pandemic has been severe. 

Rajul Mathur, Consulting Head – Talent and Rewards India, WTW

In the current work from home/hybrid work model for most organisations, home has become like an office and the expenses that are incurred by employees to manage work should be eligible for tax benefits or a standard limit should be provided.

Pooja Prabhakar, CEO & Managing Partner of employment law firm BCP Associates

WFH and hybrid working is an evolving work culture that is mutually benefiting both employees and organisations. Issues like the pandemic that propelled this culture, is actually helping growth in employment rather than affecting employment opportunities. Any tax burden or constraints under labour laws would therefore be detrimental to the overall ecosystem. 

Raj Khosla, Founder and MD of fintech firm MyMoneyMantra.com

Many companies provide laptops, computers and furniture to employees to work from home. Others give a fixed allowance to employees to bear the cost of remote working. The budget should clarify how these costs are to be accounted for by companies as well as provide some relief for such allowances to employees. Such payments should be exempt from tax in the hands of employees if supported by actual bills. 

Yogesh Agarwal, Founder & CEO of Onsurity employee healthcare platform for startups and MSMEs

The new normal of ‘work-from-home’ policy being adopted by the companies has induced people to buy properties in their hometown, especially Tier-2 or Tier-3 cities. An increase in home loan interest rate deduction from Rs 1.5 lakh to Rs 5 lakh per annum, can give the much-needed fillip to the investment multiplier.

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