Govt to offer tax deductions for WFH employees

According to PwC India, the government could look at providing deductions for expenses incurred by salaried employees while working from home in the upcoming Union Budget as it looks to boost demand. Addressing a pre-budget session, Pwc India senior tax partner Rahul Garg said demand creation is particularly focussed on money being given or left in the hands of the individuals.

Garg said, "One clear thinking is at the level of a small to medium taxpayer can we look at, in view of the Covid, a deduction to them particularly for salaried employees when they work from home. So whatever expenditure they are incurring working from home, which expenditure in the typical case would have been incurred in office by their employers if they were using offices to work if you allow that to be treated as giving them an entitlement for deduction and that saves tax for them. It will leave more money in their hands."

Garg said such a measure would be "reasonably equitable" because if businesses were to incur that expense, that would have been a deductible expenditure in their books.

Today that deductible expenditure sits in the hand of the individual and therefore there is no tax base reduction or sacrifice of any revenue. It creates a situation of shifting the money in the hands of individuals by giving a concession or deduction in respect to Covid related expenses and they could look at a few thousand rupees per month and every person who is employed can get deduction and tax relief in their hand and contribute to demand creation.

Garg also noted that the Budget, to be unveiled on Feb. 1, could also see amendments in the tax laws for entities who are facing unintended tax consequences for overstaying in India and has therefore become a resident in India, and therefore his global income becomes taxable in India or the income beyond what was intended to be taxable in India becomes taxable due to forced stay.