Is work from home reimbursement taxable: Businesses have realized that remote work is feasible in the long term and provides the company with cost savings opportunities while also providing employee safety. Today, a lot of employers are considering the long-term benefits of remote work, whether it takes the form of full remote work or a hybrid model that combines remote work with traditional office hours.
Working remotely had its own set of difficulties and extra costs for the employees. For instance, many employees had to pay extra to ensure there was always electricity, a high-speed internet connection, an ergonomic work chair, stationery, a maid in case there was no creche, air conditioners, etc. Also at the same time some businesses made the decision to forgo any kind of complexity or administrative burden and instead gave employees reimbursement for any costs associated with working remotely.
Although the business must provide both allowances and reimbursements, these benefits may be subject to tax in the hands of the recipients. Allowances that are given by employers without any documentation or policies relating to working from home are taxable.
In case employers are granting reimbursements for purchasing assets or incurring expenditure, it is possible to claim such reimbursement as non-taxable in the hands of the employees if it can be demonstrated to be necessary for conducting work from home like chairs, study table etc.
When assets are provided by the employer to the employee for use and can have multiple uses, such as an air conditioner, challenges may arise in claiming tax exemption on some benefits. The same is true for additional costs incurred as a result of working from home, such as higher electricity costs or maid/nanny expenses so under current law, any expense reimbursed by the employer on such an account will be taxed. High-speed internet connections, modems and stationary, study tables, ergonomic chairs are your best bets for claiming tax exemption.
Tax Exemption is available for reimbursement if following conditions are fulfilled:
- The expenditure should not be incurred to purchase non work-related furniture like a recliner; dining table etc.
- The expenditure should be incurred during the remote working period as stipulated by the employer.
- The employee should keep the original invoice of the expenditure.
- Ideally the invoice should be in the name of the employer for better tracking of the asset. In cases, where the invoices are in name of the employee, the policies may require the employee to return the amount reimbursed by the employer for purchase of assets should the employee leave in a short span of availing such benefits.
Certain reimbursements like food ordered through apps for purchasing food/ non-alcoholic beverages during working hours can be claimed as tax free to the extent of Rs 50 per meal.
Because work from home is becoming more popular, employers will need to develop solid policies to address the tax exposure from both a corporate and individual perspective. The policy and the employer’s strict adherence to it can serve as compelling justification for providing their employees with these benefits that are tax-free and assist with audits. As the idea develops, it is also anticipated that the individual taxpayer will receive some tax relief that is specific to working from home.
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