WFH could mean higher tax for some, altering pay structure may give relief

But many expenses incurred during WFH can't be treated as non-taxable until law is amended

If you think work from home due to Covid-19 has benefited you by cutting down expenses like daily commutes and eating out, think again. You may end up with a higher income-tax (I-T) bill for the current financial year (2020-21). The reimbursement components of your salary require you to furnish bills before they become tax-exempt. Producing them may be difficult this year.

According to Suresh Surana, founder, RSM India: “Reimbursements like motor car, entertainment, conve­yance expenses, etc will be taxable as they are linked to actual expenses incurred while performing your duties.” Take the instance of conveyance allowance. Employees couldn’t move out of their homes to perform their official duties during the lockdown. If they can’t produce documentation, the tax deduction for such a period will not be available.

It will also be impossible to produce restaurant bills. Says Gopal Bohra, partner, NA Shah Associates: “If a company reimburses fuel, conveyance or entertainment expenses for the period when there was travel restriction, questions could be raised.” Employees may also find it difficult to claim leave travel allowance (LTA), or house rent allowance (HRA) if they moved to their hometown.

Can anything be done to prevent an increase in tax liability? Says Prashant Singh, business head-comp­li­­ance and payroll outs­o­u­r­cing, TeamLease Services: “Some companies are restru­c­turing the CTC. A few opti­o­ns, like insurance for parents, can be considered save tax.”

Experts say the Centre should relax the rules related to the production of vouchers or bills for this year. Says Archit Gupta, founder and chief executive officer, ClearTax: “Employees who foresee a higher tax outgo should rework their salary. Reimbursements for broadband connection and telephone may be claimed by producing bills.” Can employers reimburse expenses like purchase of furniture, laptop, etc? Says Bohra: “Until such allowances are specifically exempted through amendment of I-T law, to consider them as non-taxable perquisite will be litigious.”