Companies Weigh Taxation Benefits for Remote Working

Employee wellness and welfare have been the focus of many employers during the ongoing pandemic. Given the extremely contagious nature of Covid-19, work-from-home (WFH) has become the order of the day. The workforce too has quickly adapted to the new way of working and employers have been swift and proactive in extending various benefits to employees to enhance efficiencies during WFH, as well as to help employees meet Covid-related personal challenges. Since these pay-outs were specifically triggered by the pandemic, the existing tax regulations did not have specific provisions relating to the taxability or otherwise of these. Below are some approaches or views that are being adopted concerning the taxability of these benefits.

1. Benefits enhancing WFH efficiency

Companies were quick to realise that remote working is a new reality. This necessitated that employees are provided with the required infrastructure to enable them to effectively perform. Some common benefits are - 

Internet – Seamless connectivity with office systems and larger bandwidth to attend video calls, etc., necessitated the need for high-speed internet at the “home office”. Companies chose to provide high-speed data cards or internet reimbursements, adopting the view that these are necessary for official purposes, and hence not taxable.

Furniture – Another benefit provided by companies is for the home office set-up support in the form of furniture like ergonomic chairs and tables. There are varied approaches to this; while in some cases the furniture was procured in the name of the company, in others, the payment was made in the form of reimbursement against vouchers, adopting the view that since homes are now an extension of the office, it is hence not a personal benefit to the employee. However, companies have also paid these out as allowances, to keep the administrative process simpler; in such cases, these are considered taxable. 

Computer / Printers: Many companies had to issue laptops to employees who were working out of desktops at office premises. The laptop and computers, including related peripheral devices such as a mouse, keyboard, etc. provided by the employer, are specifically exempt from taxation. Similarly, if employees purchase such items in the name of the employer, then the reimbursement is also not taxable.

 2. Health-related benefits

Employers have been highly sympathetic to the trying times that employees have had to endure and have provided wide-ranging benefits such as increased leaves, insurance benefits, cash pay-outs, etc., to help employees steer through the Covid-19 waves. Some common benefits are- 

Enhanced Medical Insurance – Given that many employees have had to meet expenditure on Covid-19 related treatment for multiple family members and the severe impact in many cases, companies have increased the medical insurance coverage so that employees can avail appropriate treatment. Under the tax laws, the medical insurance provided under a scheme approved by IRDA or Central Government to all employees is non-taxable. 

Medical Treatment – Some companies provide benefits in the form of reimbursement of medical expenses incurred in connection with the treatment for the employee or family members affected by Covid-19. The government recently announced that any such reimbursement will be non-taxable and suitable changes to tax laws are expected to be rolled out.

Medical Equipment – The opening-up of economic activities has necessitated that we follow rules of new normal such as social distancing, regular health monitoring, etc. Many companies operating in the services with multiple contact points like courier, delivery, banking, or hospitals, are providing portable devices such as oximeter, thermometer, etc. so that employees can regularly monitor their health status while working. Since these are provided to ensure continuity of business, the general view is that these are non-taxable.

As there are no specific provisions in the law to exempt such supplies, the applicability of perquisites rules needs to be analysed on a case-to-case basis depending upon the rationale of providing such benefit.

 3. Loan benefit

Many companies are providing salary advances or extending loans to employees to tide over cash crunch triggered by high medical expenses. This is more so where the family member is not covered under insurance or if the cashless facility is not available etc. The loan provided by an employer for treatment of specified diseases like respiratory system-related heart ailment etc. is not taxable. 

For any other purpose (e.g., rehabilitation, setting patient room at home) the loan up to Rs 20,000 is non-taxable. A loan of a higher amount is taxable as a prerequisite. 

 4. Financial support to employee’s family

Many sole breadwinners have succumbed to Covid-19, leaving families with an irrecoverable loss. Companies have been extending financial support to family members of deceased employees, in the form of an ex-gratia payment. The government has clarified that the ex-gratia amount received by family members will be tax-exempt.  

It is encouraging to see companies coming with multiple benefits to support their employees in these challenging times. Such goodwill gestures will surely boost employees’ morale. The recent announcement from the government to tax-exempt the financial support received from the employer for Covid-19 treatment for financial years 2019-20 onwards, is indeed a timely and welcome move. 

The author is Partner, Deloitte India

DISCLAIMER: Views expressed are the author’s own, and Outlook Money does not necessarily subscribe to them. Outlook Money shall not be responsible for any damage caused to any person/organisation directly or indirectly.