Easy to surprise your millennial employees -- tell them what it was like to work without mobile phones and the Internet. It’s not just millennials! Even the pre-90s generations will have a difficult time recalling that era. These days, most of us start our day by checking work emails, manage calendars, crossing off the to-do list and more on our phones, even before we step into the office. It’s almost like these phones come with a promise of encouraging agility and better productivity at work.
So, there’s a little wonder to why mobile phone reimbursement is one of the most preferred tax-saving opt-ins amongst employees. About 76% of employees prefer mobile and internet reimbursements, according to a study conducted by Zeta in association with Nielsen India on Employees Tax Benefits.
Maximise tax savings with mobile and internet reimbursements
Communication benefits or mobile and internet allowance is a employer provided tax-savings programme that helps employees take home a higher salary without adding any additional cost-to-cost (CTC). As a pre-tax deduction, communication reimbursement helps reduce employees’ overall income taxes.
According to the Income Tax guidelines, mobile and internet reimbursement or communication reimbursements cover internet/data connection and phone bills -- both landline and mobile number. The tax allowance is provided only on official calls and data usage.
In this article, we will explain what communication tax-benefits cover and its advantages for you and your employees:
BYOD policy: Communication reimbursement follows the Bring Your Own Device (BYOD) policy of allowing employees to use their own smartphones or other devices for work purposes. Under this policy, your employees can claim their phone bills and internet expense even when they are using your personal phone to make official phone calls. This way you don’t have to worry about incurring any additional costs of providing a device; as it’s often done in case of laptops or desktop.
One claim for all: Of the 51 allowances mentioned in the Income Tax guidelines, some tax-saving benefits may require your employees to have a certain profile. However, in the case of mobile/phone and internet allowance, all your employees can claim this benefit given its universal usage.
The number game: As per the Income Tax guidelines, there is no cap or limit to which an employee can make the claim. Having said that, you still have the advantage to decide the annual reimbursement limit. On average, most companies offer anywhere between Rs 1,000 to Rs 3,000 per month for mobile and internet claims.
Keep a record: You need to keep records of the bills to offer tax deductions. These records may include digital proofs such as e-bills or physical copies. Here’s a tip: Ask your employees to regularly send digital copies to avoid going through the heaps of paper during tax time.
Lead with guidelines
According to the rules defined in the Income Tax guidelines, telephone and internet reimbursements are non-taxable in the hands of the employee. But, to claim these reimbursements, employees will have to follow certain guidelines:
1. Name to claim: To make the claim, employees must have a data or phone connection in their name. These telephone bills can include both landline or a prepaid connection.
2. Number of connections: Though the Income Tax guideline doesn’t follow any rules with regards to the number of connections, most organisations consider just one connection/number for reimbursement.
Be the salary hero
To further help you understand how you can boost your employee’s take-home salary, we’ve rounded up some numbers basis the assumption that you’re likely to offer a reimbursement cap of Rs 2,500 per month for mobile phone and internet reimbursements. Further, this assumption is for employees whose salaries fall under the 30% tax slab:
|Assuming avg eligible limit||Annual value of perquisite||
Yearly tax saving
|Rs. 2,500 / month||Rs. 30,000||Rs. 9,000 p.a|
Given the increasingly competitive job market, it’s key for employers to offer benefits that’ll encourage and retain good talent. And, offering benefits on day-to-day expenses like communication, can help you amp your offer. Meanwhile, check out 5 lesser-known tax-saving options you don't want to miss.
After all, who doesn't want a little extra now and then? So, this new financial year how about you give your employees something extra that’ll be thankful for? To get you started, here’s a handy e-book on easy to implement employee tax-savings benefits.