Future Generali

Can my work-related phone and WiFi bills help me reduce taxes?

Employers often reimburse employees for the expenses incurred by them in the delivery of their services. For instance, employers might reimburse official travel bills or pay for the food consumed during such travel. One of the most common reimbursements these days is the phone and internet bill reimbursement which allows employees to claim the money they spent on their phone and data networks as part of their official duty from their employers.

While this reimbursement is usually not part of the official salary structure or the cost-to-company laws, it is still considered an income for the employee. However, its tax treatment depends on the company’s structure as well as the actual amount received in the form of reimbursement.

  Generally, telephone reimbursement provided to employees is not taxable according to Rule 3(7)(ix) of the Income Tax Act. If your office work demands a mobile/telephone/internet connection, you can claim a 100% exemption on the billed amount. Phone bill reimbursement includes both telephone and mobile phone bill reimbursements. This amount can also include payments made for mobile internet or home Wi-Fi if you tend to work from home a lot. However, the actual scope of reimbursement offered could differ across companies and even among different departments in the same company depending on the demands of the job.

As a thumb rule, official expenses on telephones, including mobile phones paid by the employer on behalf of the employee, are not taxable. The law does not prescribe any limit, but the expenses should be reasonable and usually take into account the salary/ grade of the employee. However, the following conditions are to be considered in this regard:

1. The telephone connection covers both landline and mobile connections.
2. There is no specific reference to the maximum number of connections allowed. Organisations typically allow one landline and one mobile connection.
3. The connections have to be in the name of the employee.
4. Employees should present telephone bills to their organisation while claiming telephone reimbursement
5. Expenses incurred towards both prepaid and postpaid mobile connections are allowed for tax exemption

For example, IT Professionals, employees in the sales function, HR, Middle Management, etc can claim this exemption if their employers are providing this reimbursement. While some employers may demand proofs in the form of bills and receipts to segregate official calls from personal use while giving the reimbursement, others may utilise their averages to calculate the actual amount.

  However, it must be noted that even though the Income Tax Act doesn’t specify a limit for exemption through these reimbursements, most employers do have a cap which could be around ₹2,000 per month as the maximum reimbursement offered to employees for phone and internet bills. 

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