The COVID-19 pandemic has enabled companies to execute the work-from-home model successfully. With the initial difficulties and glitches, many employers and employees have become acquainted with working from home. According to the survey carried out by many organisations, most employees would prefer a ‘hybrid work model’ in the future.
Also, many employers are getting comfortable with this model due to easy accessibility to talent across geographies. Hence, the hybrid work model seems to be the “future of corporate work culture” as now the employers can identify roles to be allowed to work from any location, roles to be carried out from office base location, or roles to be carried out at office or client premises.
The hybrid work from home model will allow employees the flexibility to select their workplace, which can be either their hometown/particular office location or work from a co-working place. This can save a lot of productive time and cost of employees, which they might have to incur to commute and purchase a residence.
However, working from home or from a preferred location comes with additional challenges and costs to employees. Employees need to incur costs in enhancing their internet connectivity, spend more on mobile/telephone expenses, ensure a peaceful separate personal space at home to carry out their official duties, and spend on office furniture, additional electricity expenses, stationery, etc. Many employees have to shift to homes with larger personal space to accommodate spouses or other family members working from home and children’s online classes.
There is an addition to the fixed cost of office furniture like office tables, office chairs, computer accessories, etc. This cost incurred by employees is not uniform across all employees segment, nor can it be quantified precisely. The cost may vary from employee to employee and from location to location. Further, currently, it is not practical for employees to document such additional expenditure to claim it as reimbursements from the employer.
Considering all of these, should the government allow the benefit of the additional deduction for such home office expenses in Union Budget 2022? The government could allow this benefit by increasing the existing standard deduction or providing a separate work-from-home deduction limit.
Please note that standard deduction is available only in the old tax regime and is not available under the “New Tax Regime” launched in FY 2020. The standard deduction was introduced by withdrawing medical and conveyance allowance. The intent was to simplify compliance, reduce paperwork, and flat tax benefits to salaried individuals.
Now, with the increased culture of work from home, the government must offer additional tax deduction benefits, which will provide them with some tax relief for the out of pocket expenses incurred by them. There is an increase in the direct tax collection by 60% y-o-y in this fiscal year, and the government may consider extending the benefits to the country’s working class.
For any clarifications/feedback on the topic, please contact the writer at jyoti.arora@cleartax.in
I am a Chartered Accountant by profession with 4+ years of experience in the finance domain. I consider myself as someone who yearns to explore the world through travelling & Reading. I believe, the knowledge & wisdom that reading gives has helped me shape my perspective towards life, career and relationships. I enjoy meeting new people & learning about their lives & backgrounds. My mantra is to find inspiration from everyday life & thrive to be better each day.
