work from home
After the Corona epidemic, the trend of work from home (WFH) has increased rapidly in the country. Even today, many companies are providing employees the facility to work from home completely or in hybrid model. In such a situation, many companies also give reimbursement to their employees for internet, mobile, laptop, office furniture and other expenses. However, income tax exemption is not available on all these payments. Tax rules depend on the purpose for which the payment is made and how it is used.
Which reimbursements are not taxable?
As per income tax rules, if the company reimburses the employee for actual work-related expenses and the employee submits his bills or other documents, such reimbursement is generally not considered taxable income.
For example, if the company reimburses the employee for the cost of internet broadband, mobile phone, laptop, software or other equipment necessary for office work, this payment can be tax-free. The condition is that the expenditure is actually job related and proper records are available.
On which payments can tax be paid?
If the company pays a fixed amount to employees every month without any bills or proof of expenses, such as work from home allowance or fixed cash allowance, then it is usually considered part of the salary. Income tax may apply on such payments.
Similarly, if a lump sum amount of cash is given to an employee for office furniture, air conditioner, electricity or household expenses and its actual use or expenditure cannot be proved, then this can also come under the ambit of tax.
It is important to keep documents safely
Tax experts say that employees should keep records related to bills and payments of internet, mobile, computer accessories or other work related expenses safe. If ever verification is done by the Income Tax Department or the company, these documents will help in proving that the reimbursement was received only for official work.
Be careful while changing job or filing ITR
If the employee has changed jobs during the financial year or has received reimbursement from more than one company, it is important to maintain correct details of all payments. While filing Income Tax Return (ITR), ensure that the correct distinction is made between tax-free reimbursement and taxable allowances.
Experts say that all payments related to work from home are not automatically tax-free. Therefore, employees must be aware of their company’s reimbursement policy, income tax rules and necessary documents. With correct information and records, not only tax disputes can be avoided, but there will also be no hassle while filing ITR.
