ITR for Work-From-Home in India

ITR for Work-From-Home in India - Here is what salaried remote employees need to know on ITR

As a salaried remote worker, if you are getting ready for filing your ITRs, here are some of the aspects we will touch upon:

• New Work Arrangements in India
• Gross Salary Structure
• 6 essential documents for ITR
• Work-From-Home and Taxes implications

Remote Working has always been a possibility but mostly reserved for the privileged or leadership roles. It is the COVID-19 pandemic that was the accelerant to the global movement towards Remote Work. While the lockdowns are being relaxed and offices are opening to employee's, 100% occupancy is a dream for the future).

New Work Arrangements in India

Whichever model employees plan to choose; daily office hustles are a thingof the past.

What started as an overnight global experiment, today is a way of life with major companies like Infosys, TCS, JP Morgan, Apple, Facebook, Twitter opting for flexible work models- Hybrid Work Model, Work-From-Home or Work-From-Anywhere is trending its way to 2021 & the future.

Employees of small as well as large companies have quickly adapted themselves to the new changes of 'how to' work in addition to overcoming many challenges to stay productive and continue to contribute to their work. However, India is yet to revisit its conventional tax laws and initiate changes towards remote work tax policies inthe terms of allowances and reimbursements packages.

With the Income Tax (IT) Return due soon we still have time for a few questions and how to deal with taxes in the current scenario. Hence, we decided to guide you by highlighting a few points for an easy ITR filing

Before that, let us look at how your Gross Salary , the Cost to Company (CTC) is structured:

• Basic salary
• House rent allowance (HRA)
• Leave travel allowance (LTA)
• Special Allowances
• Reimbursements on Utility Bills. This is over and above salary package; expenditure on Telephone bill, Internet Bill, Fuel Expenses, Meal/ Food (Grocery) coupon
• Investments & Deductions which help in Income-tax exemptions

Some of the components may vary depending on the salary package the company follows, but most follow a similar salary structure.

As a next step, to help you further, here is a list of documents that you might want to collate before starting to file you returns:

6 essential documents for ITR

• PAN Card
• Aadhar Card
• TDS certificate Form 16,16A
• Verification of Form 26AS (Tax Credit)
• Statement of personal accounts
• Investment Proofs for 80C to 80U while filing ITR-1

Do take a checklist of any other verification proof and challans required as per your tax filing.

Work-From-Home and Taxes implications

The salary of every employee is broken into multiple components, and while some are taxable, some are not. Among those that are taxable, few may be partially taxable- based on how much of the pre-set amount was used for the specific expenditure. For example, if your company is paying you ₹30000 under telephone usage header, and you end up using only ₹10000, the remainder will be taxable based on your current tax slab. Another component- reimbursements are not taxable at the hands of employees. For example, if you are paid up to ₹15000 per year on airfare, you will not have to pay taxes on the amount, but in case you do not end up using up the same, you will not get the dedicated money either.

Since everyone was working from the same office earlier, most people had the same set of expenses, and companies were able to calibrate the salary break-up in a way that employees were benefited the most. But with the advent of work from home, on a large scale, the salary breaks up needs to be more flexible. This is the need of the hour since to recreate the same environment that employees have at work, in their own homes, a considerable one time, as well as continuous expenses, are incurred.

The largest tax exemption claimed by most employees is in the form of HRA or house rent allowance, which can be as high as 50% of basic salary for those living in cities that are designated as metro cities as per The Income Tax Act 1961. As most employees have moved back to their hometowns, they will be unable to avail this exemption. If companies are not able to rejig this under some other header, the loss in the form of taxes will rise enormously.

What companies can do is instead provide employees with a one-time setup reimbursement. This can be used for things like-

• Purchasing a table and chair and setting up a workplace.
• Buying electronic gadgets like modem, mouse and keyboard or a headset.
• Getting a high-speed internet connection.

Whatever amount is claimed, can then be subtracted from the salary and this would render this amount non-taxable. On the allowance end, employees who are unable to claim existing allowances like HRA and LTA should be allowed to opt for others like-

• Electricity Bills.
• Monthly Internet Charges.
• Babysitter Expenses.
• Food Expenses During Office Hours

Companies that provide such flexibilities towards transforming the salary breakup will be able to help their employees transition to a work from home setup more seamlessly and help them save taxes at the same time.