Work From Home: As per updates, the employees opting to work from home will have to bear certain infrastructure costs such as electricity and WiFi and these will be part of the compensation structure.
Work From Home: As per updates, the employees opting to work from home will have to bear certain infrastructure costs such as electricity and WiFi and these will be part of the compensation structure.
As per a report by Economic Times, the Labour Ministry is likely to allow employers to tweak the salary structure of employees who opt for work from home permanently. The move could entail a reduction in the house rent allowance (HRA) component and an increase in reimbursement cost under the infrastructure component.
Speaking to ET, a top government official said the labour ministry may issue standing orders to redefine service conditions. He added that there is a need to redefine service conditions to ensure the employee compensation is structured taking into account the expenses incurred due to working from home.
As per the report, the employees will have to bear certain infrastructure costs such as electricity and WiFi and these need to be part of the compensation structure. Moreover, the lower cost of living for an employee due to relocating to hometown, in some instances to tier-2 and tier-3 cities, needs to reflect in the compensation package.
The official stated that the Labour Ministry is considering all the options and something concrete is likely to come soon.
If the changes happen, then the most significant tax impact could be on the HRA component. As per the present guidelines, the tax rebate for HRA is the least of three: 1) the actual HRA received from the employer, 2) 50% of basic salary + dearness allowance for those living in metro cities and 40% for those living in non-metro cities, and 3) actual rent paid minus 10% of basic salary + DA.
And suppose the HRA component is reduced and not replaced with something for which tax rebate is available, then the tax liability of the employee may rise. Moreover, the reduction in HRA will lead to an increase in the tax outgo as well as additional provident fund contributions.
