Pay More Taxes For Working From Home: House Rent, Travel Expenses Can Be Taxed Now

You must be rejoicing as the lockdown initiated work from home must have reduced your expenses and increased your savings!

However, hold that thought as working from home can invite increased tax liabilities this year. 

Read on to find out more…

Why And How Will You Pay More Tax Working From Home?

According to tax experts, salary components like conveyance allowance, House Rent Allowance (HRA) and Leave Travel Allowance (LTA) may become taxable for employees as they won’t be spending minimal amounts under these heads with work-from-home in place.

A conveyance allowance, also known as transport allowance, is provided to the employees to compensate for their travel expenses to and from their workplace. However, it is only tax-free if you actually incur the expense and produce a proof for the same.

Hence in the absence of commute to the office, this allowance may become taxable. 

There is no chance of taking a vacation in the ongoing pandemic, so claiming LTA goes out of the window this year. Hence LTA might also become taxable.

As many employees have migrated to their home towns amidst the pandemic, they are also saving on the house rent. As a result, HRA might also become taxable. 

What is Work From Home Allowance? How Will It Be Taxable?

Some companies have started work from allowance wherein they are providing their employees a fixed amount to incur expenses for electricity bills, internet bills, office setup furniture, buying electronic devices like laptops, and so forth.

However, employees are not required to produce proofs in the form of bills of these expenses which might make them taxable for the employees. 

What Do HR and Tax Experts Have to Say?

According to a report in the Times of India, tax and HR experts are coming up with ways to help employees reduce these impacts by restructuring salaries.

ClearTax founder and CEO Archit Gupta told TOI, “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.” He added, “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 at this stage rather than restructuring salary components, a structural change in tax laws might help. She said, “For now, companies are sticking to providing separate WFH allowances in the nature of reimbursements.”