NASSCOM Recommendations on industry requirements under Income Tax Act to enable Work from Home on long term basis
Blog: NASSCOM Official Blog
About 90% of the workforce employed in IT-BPM sector continues to work from home (WFH). Given the available technologies and an impetus from the SARS-CoV-2 pandemic, IT/ITeS companies are looking at a long term blended working model with both work from office and work from home as a permanent feature.
Based on industry feedback in relation to provisions under Income Tax Act, 1961 (Act), there is uncertainty and requirement for enabling provisions in the context of WFH. In this context, NASSCOM recently made a representation to Central Board of Direct Taxes and Ministry of Finance to examine certain recommendations which can help industry plan their operations from a long term basis. Given below is a brief summary of our recommendations on this front:
- Clarification that expenses reimbursed by companies in enabling WFH for its employees will not be classified as perquisite – In order to provide a proper workspace setup to employees, many companies are opting to reimburse expenses incurred by employees (on use of personal internet dongles / home Wi-Fi broadband connections, phone bills, etc.). In absence of explicit clarity in tax provisions, there is an apprehension that reimbursements on account of WFH related expenses could be classified as perquisite under S.17(2) of the Act by tax departments, on which employee will be liable to pay tax. Hence, we have requested the Government to clarify upfront that the re-imbursements given to employees for expenses incurred to enable WFH will not be treated as perquisites under S. 17 of the Act.
- Provision of tax deductible WFH allowance, similar to transport allowance, to cover expenditure incurred by employees on purchase of necessary infrastructure/ accessories – In addition to the above, there is also a need for WFH allowance for expenses which cannot be easily claimed as re-imbursement and shall entail avoidable burden if the reimbursement related processing and recordkeeping is required. Further, employees incur certain additional expense of fixed nature for WFH where bifurcation of the share of expense for business purpose is not feasible. We have requested the government to provide a tax deductible WFH allowance, similar to Transport Allowance, of an appropriate value.
- Clarification on the treatment of other allowances/ benefit provided by employer under Income Tax Act in case of WFH scenario – The Act provides for a host of allowances to employees on the premise that employee would incur expense while conducting their official duties. For example, meal coupons provided to employees are exempt from tax up to INR 50 per meal. However, with employees working from home, it needs to be clarified that such coupons shall continue to be exempt. In light of changed business scenario, we have requested the government to provide suitable clarification on meal related exemption including suitable revision of the exempt amount.
These measures will help industry in providing a seamless work from home experience for employees while ensuring continuous business process.
We are pursing the above recommendations and shall keep you updated on further developments.
For more details, kindly reach out to Tejasvi@nasscom.in
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