Yeah, employees are in the loss due to the pandemic, job loss, salary cut, work/ leave without pay are some of the very well known issues employees are facing at present time but more tax payment is another pain COVID 19 is going to add in this list.
If you are working from home during this COVID-19 Pandemic and thinking that you are saving a good amount of money by not spending on eating out, commuting to the office or leisure travel, and shopping then Hold Onto Your Happiness and wait for a second because you may have to shell out more on your tax liability later for the ongoing FY 2020-2021.
In a case where a person’s cost-to-company is Rs 10 lakh that includes HRA, conveyance, leave travel allowance LTA, and communication reimbursements may end up paying over 70% more income tax for FY21 
A quick guide to the complete process of Income Tax Return Filing along with an introduction to e-filing, eligibility, and the deadline for filing the ITR. Read more. It has been estimated by assuming remote work continues until the end of the fiscal and his company announced a 20% pay cut in April.
Professionals are working from home thus some of the components of the salary such as conveyance allowance can now no longer be exempted from taxation. On above that due to the spread of the pandemic you may also not be able to take a vacation and claim LTA
Additionally, Conveyance is only exempt from tax if offered as reimbursement, if actually incurred and supported with proof. Thus in the absence of any official commute, it will be treated as taxable income.
Furthermore, If you vacate your apartment and moved somewhere with your family to save on rent, then the HRA will not be a tax-free component of salary and it will attract taxes.
| For a CTC of RS 10 Lakh per annum | Taxable Salary | ||
|---|---|---|---|
| Salary Components | Bill Submitted | Bill Not Submitted | |
| Basis Salary | INR 5,00,000 | INR 5,00,000 | INR 5,00,000 |
| HRA | INR 1,80,000 | 0 | INR 1,80,000 |
| LTA | INR 20,000 | 0 | INR 20,000 |
| Conveyance Allow | INR 30,000 | INR 30,000 | INR 30,000 |
| Telephone & Broadband | INR 35,000 | 0 | INR 35,000 |
| Meal Coupan | INR 25,000 | 0 | 0 |
| Special Allowance | INR 2,10,000 | INR 2,10,000 | INR 2,10,000 |
| Total | INR 10,00,000 | INR 7,40,000 | INR 9,75,000 |
| Standard Deducation | INR 50,000 | INR 50,000 | |
| Net Taxable Salary | INR 6,90,000 | INR 9,25,000 | |
| Tax Payable | INR 53,337 | INR 97,310 | |
| Education Cess @ 4% | INR 2,134 | INR 3,892 | |
| Total Tax | INR 52,520 (TAX EXCLUDING INTEREST U/S 234A,B,C) | INR 1,01,400 | |
In this matter, Prakash Kotadia, BDO India partner (tax & regulatory services) said that “In case a person has vacated his rented house, and doesn’t pay rent now, his tax liability will increase as the HRA component of his salary will also be taxable as income,” he further added that “However, we must remember that the individual’s cash outflow (relating to rent) will decrease.”
Additionally, If you are getting “no-questions-asked” WFH allowance in which you don’t have to provide proof of how you spend it, then the same will be taxed as an income.
Read Also: Free Income Tax Calculator for FY 2019-20 (AY 2020-21)
A tax expert said that “We have been receiving increased inquiries from HR departments of various companies seeking guidance on how they can help their employees reduce their tax burden,” he further added that “The government can also look at some sort of relief to avoid salaried class facing large tax bills due to the new remote work mechanism.”
Anjali Raghuvanshi, chief people officer of Randstad India said that “restructuring salary components may not help at this stage without a structural change in tax laws. For now, companies are sticking to providing separate WFH allowances in the nature of reimbursements”.
Vaitheeswaran K, Advocate and tax consultant said, “The personal tax law needs a revamp to provide for more relevant allowances. The conveyance amount, for instance, can be recast to provide for expenses related to office set-up, including IT, communication, etc.”
Many experts appreciated the government’s recent move, where the government is planning to replace allowances in the budget for the salaried class with standard deductions. Experts and even some tax professionals believe that the government is thinking in the right direction and this step will make a remote-working future easier.
