On personal taxation front, many recommendations have been made for the upcoming Union Budget 2022-23. Of these, a hike in the standard deduction limit is clearly the common man’s top ask of Finance Minister Nirmala Sitharaman.
Tax experts vehemently agree that the salaried class in India should be given some kind of relief, similar to that given by other countries to their working professionals, in order to mitigate growing work-related costs.
Cost of working from home entails increased electricity, internet, stationery, logistics and other such expenses— for which salaried individuals must be compensated. Standard deduction fits neatly into the scenario. The tax deduction was given with the intention of compensating for work-related transport and medical-related expenses of the working person. Covid-19 and ensuing work from home requirements have clearly increased these costs for the average worker.
The standard deduction, scrapped in 2005, was reintroduced in the Budget 2017-18. It was hiked to Rs 50,000 from Rs 40,000 by Piyush Goyal in the interim budget of 2019.
Personal tax experts say the flat deduction on salary income should be increased from Rs 50,000 currently to at least Rs 1 lakh. This will be a big relief to all employees in reducing their tax burden at this time of need.
Until AY 2018-19, which is before the implementation of the standard deduction, transport allowance and medical allowance of Rs 19,200 and Rs 15,000 were available to salaried individuals to claim as relief from their taxable income. Collectively, this meant a deduction of Rs 34,200—which was subsequently increased to Rs 50,000 by way of standard deduction.
Deloitte India in its Pre-Budget Expectations 2022 note said, “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”. It recommends an additional ‘work from home’ standard deduction of Rs 50,0000 for salaried employees.
The Institute of Chartered Accountants of India (ICAI) its pre-Budget memorandum also urged the government to consider tax relief on work from home expenses. ICAI notes tax exemption is needed for such employees because they incur additional expenses for “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.” Like Deloitte, ICAI also suggests a standard deduction of Rs 100,000 for salaried employees for working from home-related expenses. “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
