Standard deduction of Rs.40,000 was announced on February 1st. We think the high point is that it will do away with a lot paperwork (if you hadn’t guessed by now, we’re against paperwork) since no proofs will be required to claim this deduction. It has its advantages but soon the news proved to be bittersweet for a lot of salaried taxpayers. While the standard deduction aims to put a further Rs.5,800 back in the taxpayer’s pocket, the increase in education cess from 3% to 4 % will at least make it negligible for some and at most nullify it for others.
Here’s a rundown of the numbers to help you understand exactly how the new changes impact the salaried taxpayer:
In the final analysis, the annual net benefits in 3 cases we’ve examined for all tax slabs are trifling numbers. Let’s be honest, you wouldn’t exactly stop the presses for this news. You could decide to chalk it up to a no-benefit-no-loss situation (even though it is a loss for the taxpayers in the 30% tax slab).
Shortly, the Rs 40,000 standard deduction will become a built-in tax deduction that an employee can take while preparing their taxes; something that every company will have access to. So any HR manager or business leader should ask these questions: How do I go the extra mile? How do I offer employees something more than just the standard? Is there a way through which I can boost employee retention and make job offers more attractive?
One of the ways in which you can do that is to offer individual deductions (employee tax benefits) that when added up, account for more savings than standard deduction alone. Through the use of these benefits, your employees could save up to Rs 80,000 every year.
Here’s the clincher: it won’t cost your company. You’re helping employees make the most of their gross salaries without adding any more to the company’s cost. Employees don’t have a choice when it comes to whether to pay taxes, but you can give them a choice of how to approach their tax savings.
There are individual benefits, with newer and better ways to administer and use them — digitally. These individual digital benefits, when added up, lower the taxable income of your employees considerably. Some of these that you should consider are:
Now, if you think that managing these benefits can be problematic and time-consuming, you haven’t tried a digital reimbursements programme that when once set up, can practically run itself. A digital reimbursements programme that saves you from performing manual checks and verification is what you need.
Consider for a moment that you’re an HR manager in a company, which has a strength of 1000 employees. You probably have a team of 8 or 10 human resource executives to cover the HR operation (The national average of HR professionals per 100 employees is in fact much lower than that!). Whatever your actual situation is, it can be an overwhelming project to handle paperwork and administration of benefits for that big a force. That’s costing you a lot of time, with a very real opportunity cost.
Digitising the way you administer and process employee benefits can save you time, effort and manpower resources — that’s a given. But what happens next is that you can decide what to do with all that time and effort you save — put it to work on things that really need your attention. E-assessment of income tax is going to be a reality this tax-filing season. It’s a good idea and good business too to match the upward digital trend the government is showing.
Let now be a start, a foundation on which you build a strong, efficient employee benefits programme. Start asking questions about how much more tax you can help your your employees save. Start asking questions about what you can do beyond just the minimum. Write to us (firstname.lastname@example.org) and we can help you with some answers, and beyond that, we can provide a place to start.