Due to the adoption of Work from Home (WFH) post imposition of lockdown norms to contain the spread of Coronavirus, taxpayers have to incur additional expenses.
There is no clarity regarding claiming these expenses as business expenses. Many expenses are also not reimbursed by employers such as increased electricity bills, internet charges, etc. In this regard, NA Shah Associates, the country’s oldest tax and audit firm has requested Finance Minister Nirmala Sitharaman, to allow deductions for all such expenses that have been incurred by the employees-taxpayers during the lockdown.
In a pre-budget memorandum, the firm said, “Many countries in the world have recognized this and come out with guideline to the taxpayer for claiming such expenses”.
For example, the firm said, Australia has come out with following guidelines for claiming expenses for work from home: Expenses which taxpayer can claim:
electricity expenses associated with heating, cooling and lighting the area from which you are working and running items you are using for work
cleaning costs for a dedicated work area
phone and internet expenses
computer consumables (for example, printer paper and ink) and stationery
home office equipment, including computers, printers, phones, furniture and furnishings – you can claim either the
full cost of items up to $300
decline in value (depreciation) for items over $300.
Expenses which tax payer cannot claim:
the cost of coffee, tea, milk and other general household items your employer may have provided for you at work
costs related to children and their education, including setting them up for online learning, teaching them at home or buying equipment such as iPads and desks
items that are reimbursed for, paid directly by employer or the decline in value of items provided by employer – for example, a laptop or a phone
time spent not working, such as time spent home-schooling children or lunch break.
occupancy expenses such as rent, mortgage interest, water and rates.
The firm said many other jurisdictions have announced similar measures. Indian government should also announce similar measures to compensate taxpayers who have incurred additional costs by working from home, it urged the FM.
During the pandemic, a large number of taxpayers who contracted with COVID-19 have incurred hugely on medicines, hospital stay, medical expenses (CT Scan, Covid testing etc.), expenses in connection with being quarantined/ self-isolated at COVID centers/hotels. The current tax law does not provide for benefit of these expenses against taxable income. Hence, the government should allow a deduction for medical expenses too, while computing the income of the taxpayer, the memorandum said.
Allow CSR expenses deduction to eligible corporates Under Section 135 of the Companies Act, companies fulfilling certain criteria (net worth, turnover, profit, etc) have to make corporate social responsibility (CSR) expenditure. Under Income Tax Act, CSR expenses are not allowable as a deduction against business income.
Due to the pandemic, the profitability of companies has taken a big hit. On an account of this CSR, spend of many corporates will go down. On account of the extraordinary situation arising as a result of Covid, there is an urgent need for corporate to enhance CSR expenses as the government cannot fill up the void created by lower spending of CSR.
In this situation, “the government should allow deduction of CSR expenses against business income to corporates falling under the old or new regime of taxation. This will motivate corporates to increase their CSR expenses”, the memorandum urged the FM.
