Budget 2022 expectations for Salaried Employees: Government will increase the Standard Deduction limit under Section 16 of the Income Tax Act from Rs 50,000 to Rs 1 lakh.

Budget 2022 for salaried: Rs 50,000 Work From Home allowance, Rs 1 lakh Standard Deduction expected

By: NEGI RK 2022-01-13

Budget 2022 expectations for Salaried Employees: Covid-19 pandemic has badly hit salaried employees since 2020. The raging virus has forced employers across businesses to ask their employees to Work From Home.

Under unprecedented circumstances, employees had not only to spend extra to protect themselves and their families from Covid-19 but also undertake several additional expenses like internet and telephone charges, furniture to set up home office, extra electricity bills etc. Before the pandemic, employees didn’t have to bother about the latter expenses as all necessary things for work were provided by the office.

Considering the current situation, employees are working from home across businesses. Employees are likely to incur additional ‘work from home’ – related expenditure, such as internet charges, rent, electricity, furniture, etc., and therefore, employers would need to provide allowances to meet these expenditures,” Deloitte India noted in its Pre-Budget Expectations 2022.

“It is recommended that an additional deduction of ‘work from home’ allowance of INR 50,000 be given to employees who are working from home,” Deloitte India recommended

In its pre-Budget memorandum, the Institute of Chartered Accountants of India (ICAI) also suggested the Government to provide tax relief on work from home expenses. “It is suggested that expenses incurred towards furniture/other set-up costs may be specifically exempted,” ICAI said.

The ICAI further said that due to lockdown, organisations have implemented work from home. “Since the employees may not have the proper set up at home for carrying out official duties, the employer provides necessary set up so that the employees can execute their work efficiently and effectively.”

According to ICAI, tax exemption should be provided because the “provision of desk, chairs and another set up at employees’ residence in light of work from home could be taxed as perquisite in the hands of the employees.”

Rs 1 lakh Standard Deduction

It has also been suggested that the Government should increase the Standard Deduction limit under Section 16 of the Income Tax Act from Rs 50,000 to Rs 1 lakh.

Standard Deduction is provided to cover many expenses incurred during the course of the employment other than profession tax on employment. There are various expenses that employees have to incur during the course of employment which they cannot claim as a deduction. Also, a few exemptions available to them u/s 10 are subject to upper limits which have been fixed several years back and virtually serve no purpose on account of inflation, according to ICAI.

It further said that during the course of their employment, employees have to incur various expenses, including for upgrading skill, for rendering their services as employees, deduction for such expenses needs to be enhanced every year. For avoiding leakage of revenue, such deduction may be linked to cost inflation index just like as it happens for income under the head capital gains and maximum may be restricted up to say Rs. 1,00,000.

“It is suggested that the standard deduction u/s 16 may be enhanced to at least Rs. 100,000 to ease the tax burden of the employees and keeping in mind the rate of inflation and purchasing power of the salaried individual and rather it be linked to cost inflation index for regular enhancement in deduction amount similar to available for income under the head capital gains,” ICAI said.

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In veiw of above salaried employees are expecting the Government to provide a Work From Home Allowance in the upcoming Budget 2022 to provide tax relief on expenses incurred for carrying out office works from home during the pandemic.

The Government may take inspiration from countries like the UK, where a flat rate of GBP 6 per week of tax relief for additional household costs, if one has to work from home, has been provided to salaries employees.

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