India’s salaried are perhaps the most honest of all taxpayers. TDS on salary is well laid out leaving little scope for any kind of favourable tax arrangements which are legal. At the same time, those running a business are allowed to reduce related expenses from their business receipts. And in case the business runs a loss, it can be reduced from future business income. On the other hand, the salaried have to do a tight rope walk. Any excesses must be absorbed as only a small set of deductions are allowed to be claimed from salary income. If you are someone who doesn’t have to pay interest on home loan EMIs, the available pool of tax benefits becomes even smaller.

With the pandemic showing no signs of receding, several salaried employees have moved back to their hometown, vacating their rented houses and cutting back on unnecessary spends. Which means they will not be able to claim any tax benefit on their HRA component. Those who get leave travel allowance are unlikely to make any trips to claim the tax benefit.

India’s tax laws do not include any special benefits for taxpayers who work from home. Because of forced work from home, lakhs of employees have now made special arrangements at home. Some have dedicated a room and have bought new furniture. Many have had to invest in gadgets such as headphones, cameras, printers, monitors, ergonomic chairs and laptop stands. Nearly all salaried taxpayers have reported increase in their monthly expenses via higher utility bills; more bandwidth bought on broadband, higher electricity consumption etc. These employees are not eligible to deduct their utility bills or the cost of asset purchase from their salary income. Several of these expenses remain unreimbursed through the employers.

On the other side is the massive job losses India is witnessing. According to estimates by the Centre for Monitoring Indian Economy, around 122 million people in India lost their jobs in the month of April 2020. CMIE also estimates that around 19 million jobs in the formal economy have been lost during the lockdown. A report by the International Labour Organisation and the Asian Development Bank put the estimates at 4 million of the number of Indians below the age of 30 who have lost jobs due to the pandemic. Around 38 lakh EPFO members have withdrawn a total of 44,000 crore rupees from their EPF accounts. It is easy to see the kind of humanitarian crisis from the loss of jobs that is unfolding in the country.

In this moment of crisis, the government needs to consider some relief for its honest salaried taxpayers. A salaried taxpayer runs on a tight budget and a drop in income in one month means that their standard of living and mental peace will be deeply impacted. Only appreciation certificates won’t be enough, the centre needs an outlay to allow deductions from income related to expenses for work from home. The easiest way to do this would be to consider around ₹20,000 worth of deduction for the FY 2020-21 towards work from home expenses for all salaried taxpayers. Additionally, all white collar workers must be allowed ₹500-800 towards telephone bills and around ₹800-1000 towards broadband expenses. Not all employers allow this reimbursement and therefore offering a deduction would serve the purpose of all salaried taxpayers. Those who have lost jobs must be allowed to receive back tax payments made by them in FY 2019-20 as a loan at a low interest rate. This data set can be corroborated from EPFO records. This loan may then be allowed to be paid back over a 5 year period. Taxpayers who will be filing tax returns for FY 2019-20 but have lost their jobs in FY 2020-21 must be allowed an interest free moratorium for unpaid tax dues of FY 2019-20 until they are back on the rolls, this can again be validated through EPF contributions.

The pain in the formal economy has been deep and will continue to be so for a few more quarters. Supporting honest tax paying citizens of the country will go a long way in reducing the stagnation and slowdown in the economy.