Alert! Work From Home Will Increase Income Tax For These Employees: How To Handle This?
With work-from-home norm becoming such a comfortable part of today’s work lives, as uncanny as it may seem, is turning out to shoot up tax liabilities for salaried taxpayers.
Many employees have realized that post the WHM model, certain allowances in their pay package, like Leave Travel Allowance, or House Rent Allowance, amidst others, have actually shot up their tax liability, due to their inability to claim this amount.
Work-from-Home Turns out to be More Pricey
Even though travel expenses, or rent expenses have actually gone down, due to WHM environment, many other expenses have crossed the roof.
As per a study, the average middle class urban household has spend heavily on computer items and furniture, along with high prices on fast-speed internet connectivity, in just the last 3 months.
One must understand that tax benefits on allowances are allowed on actual spends. If an employee hasn’t made that particular expense, then the money received against the allowance will get taxed at market rates.
How is HRA Increasing your Tax Liability?
Due to offices operating with WHM practices, many employees working in metro/urban cities have shifted to their hometowns.
Doing so, many have saved their rents. However, the twist here is that they won’t be able to claim the house rent allowance exemption, for the months they’ll be staying home.
This would add on to their tax liability, ultimately increasing their taxes.
How to Claim HRA?
According to Section 10 (13A) of the Income-tax Act, an employee can claim the rent amount as an exemption, if his/her rent is paid through HRA.
You can claim least of the under-mentioned 3 quantities, as HRA exemption.
- Actual HRA received
- For metro cities: 50% of salary, while 40% for non-metro cities
- Any excess rent paid over 10% of basic salary
Another way Out?
In case you are shifting to your relative’s place, you can pay the rent to them, for sharing your burden, which you can claim as a tax deduction.
The only thing is, this relative must then list the amount as their income and pay tax on it, based upon the tax bracket he/she falls in.