Employees have the benefit in terms of having the flexibility to choose their place of work (which could be their hometown, or office location or any other location of their choice) and also cut down on their commute time and cost. However, these do come with additional challenges and costs to the employees. From a cost perspective, employees clearly need to invest in enhancing their internet connectivity, spend more on mobile/telephone expenses, ensure availability of personal space at home to carry out their office duties, and also incur higher utility costs in many cases. With multiple members in a family working from home and with the need to accommodate online classes for children from home, the salaried class has also looked at moving to homes with larger personal spaces to accommodate all of this.
This is clearly in addition to the one-time home office set-up costs in procuring furniture, ergonomic chairs and computer accessories etc. The ongoing cost that employees may incur is clearly not uniform across all employees nor specifically quantifiable. This varies from employee to employee and from location to location, but clearly there is an additional ongoing investment required from employees to manage working from home. Further, it may not be practical for employees to document such additional expenditure to claim the same as reimbursements from the employer.
Keep all of this in mind, can the salaried class expect a deduction for such home office expenses in calculating their taxes in Budget 2022? Clearly, there is a need to see whether this should be in addition to the existing standard deduction, which was re-introduced in Budget 2018, effective from FY 2018-19. The standard deduction is available only to those employees who choose the old tax regime and is not available under the “simplified new personal income tax regime”. Further, at the time of re-introducing this deduction, the exemptions available to employees towards medical reimbursements, conveyance allowance etc. were withdrawn. Clearly, the intent was to replace this with the standard deduction, and also enhance ease of compliance and reduce paperwork with increased tax benefits to employees and extending the benefit to pensioners as well, since they did not enjoy any deduction for transport and medical expenses until then. The prevalence of home office or working from home at that time was clearly not significant.
The existing standard deduction, therefore, should not be perceived as a limit to cover deduction for work from home allowance. There is clearly a case for either introducing a new deduction for home office expenses or increasing the existing standard deduction limit for those working from home. A lump-sum deduction towards home office expenses, while providing relief to those working from home, will also reflect the norms of minimum governance and ease of compliance for taxpayers with no additional task of maintaining the supporting documents for same.
(Saraswathi Kasturirangan is Partner, Deloitte India; and Vijay Bharech is Senior Manager with Deloitte Haskins & Sells LLP.)
