Hi All, I would like to know the employer liability with regard to the current situation of long term work from home for most of the employees.
Would like to understand if there is any tax obligation for the employer or any new permission required.
From India, Trivandrum
Would like to understand if there is any tax obligation for the employer or any new permission required.
From India, Trivandrum
What does the poster actually mean by " employer liability " in a situation of continued WFH by most of his employees is not clear to me. In WFH, the place of work becomes the homes of the employees thereby eliminating the rigor of physical supervision, reduction in incidental expenses like power, water etc., to the employer and the physical exhaustion of everyday commuting to the employees. All these savings, if properly accounted for, would reduce overall day to day expenses of the employer thereby increasing his profit margin. But for this I don't think that an employer is to incur any other kind of tax liability and this being an alternative arrangement necessitated by the statutory lock down and its further continuance by properly observing the statutory conditions of working hours, weekly holidays, overtime work etc., does not require new permission or approval if any, from the State.
From India, Salem
6018From India, Salem
The employer is benefitted by WFH.
Many expenditures of office nature will be cut down.
Additional Tax liability does not arise for the company.
But employees need to be aware of certain tax issues which may crop up.
Taxation impact on employee emoluments:
Salary and emoluments earned by an employee in India are taxable as per Indian tax laws. However, there are certain payments which are eligible as deductions for tax purposes. For instance, House Rent Allowance (HRA) is subject to deductions based on prescribed criteria. Some payments are also treated as tax-exempt up to prescribed limits such as children education allowance etc. However, some of the payments may need to be studied in detail to gain insight on the purpose of payment and claim appropriate tax position while being compliant with the methods and documentation suggested as per the IT laws.
Additional allowances to meet expenses such as mobile phone to take official calls and internet expenses shall be treated as tax-exempt for employees. These are provided to conduct office work from a place away from the usual place of work but is essential to function or render services under the contract of employment, which are explicitly exempted.
On the other hand, allowances provided to employees for working from home could be taxable. During the pandemic, several employees have received additional benefits in the form of furniture and allowances. Some of them are discussed below:
Reimbursement of expenses to employees in relation to purchase of furniture or chair at home for work-desk may be treated as taxable if such an allowance is provided by the employer only to a limited grade of employees. Alternatively, if any employee receives a capped allowance to purchase the asset on his own, the same may be taxable in his hands in absence of any specific exemption. In case of provision of furniture or chair by the employer to the employee, the same shall be treated as perquisite in the hands of the employee as per the IT laws. This would be on account of ‘use of an asset owned by the employer’. Hence, it becomes crucial to both employer and employee to understand the income tax ramifications beforehand.
Some employers have also extended their group medical insurance policies or have opted for a wider coverage to help employees with their medical emergencies. Such benefit, being a general benefit to all employees, could be treated as non-taxable for employees.
With the change in the work-culture, more clarity is also expected from the decision-making authorities (the Government and tax authorities), in terms of the taxability of such payments.
(extract from https://www.bdo.in/en-gb/news/2020/s...-home%e2%80%99 for information purposes)
Changes in tx provisions can be anticipated as WFH becomes a part and parcel of corporate life.
Even Municipal taxes on house property may increase as home is used as office.
From India, Pune
Many expenditures of office nature will be cut down.
Additional Tax liability does not arise for the company.
But employees need to be aware of certain tax issues which may crop up.
Taxation impact on employee emoluments:
Salary and emoluments earned by an employee in India are taxable as per Indian tax laws. However, there are certain payments which are eligible as deductions for tax purposes. For instance, House Rent Allowance (HRA) is subject to deductions based on prescribed criteria. Some payments are also treated as tax-exempt up to prescribed limits such as children education allowance etc. However, some of the payments may need to be studied in detail to gain insight on the purpose of payment and claim appropriate tax position while being compliant with the methods and documentation suggested as per the IT laws.
Additional allowances to meet expenses such as mobile phone to take official calls and internet expenses shall be treated as tax-exempt for employees. These are provided to conduct office work from a place away from the usual place of work but is essential to function or render services under the contract of employment, which are explicitly exempted.
On the other hand, allowances provided to employees for working from home could be taxable. During the pandemic, several employees have received additional benefits in the form of furniture and allowances. Some of them are discussed below:
Reimbursement of expenses to employees in relation to purchase of furniture or chair at home for work-desk may be treated as taxable if such an allowance is provided by the employer only to a limited grade of employees. Alternatively, if any employee receives a capped allowance to purchase the asset on his own, the same may be taxable in his hands in absence of any specific exemption. In case of provision of furniture or chair by the employer to the employee, the same shall be treated as perquisite in the hands of the employee as per the IT laws. This would be on account of ‘use of an asset owned by the employer’. Hence, it becomes crucial to both employer and employee to understand the income tax ramifications beforehand.
Some employers have also extended their group medical insurance policies or have opted for a wider coverage to help employees with their medical emergencies. Such benefit, being a general benefit to all employees, could be treated as non-taxable for employees.
With the change in the work-culture, more clarity is also expected from the decision-making authorities (the Government and tax authorities), in terms of the taxability of such payments.
(extract from https://www.bdo.in/en-gb/news/2020/s...-home%e2%80%99 for information purposes)
Changes in tx provisions can be anticipated as WFH becomes a part and parcel of corporate life.
Even Municipal taxes on house property may increase as home is used as office.
From India, Pune
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Employers' Liability Act 1938.pdf
What Employers are Looking for in You.ppt