Do employees take advantage of all tax-saving benefits available to them? Research by Zeta-Nielsen on 1,233 employees from manufacturing and service sector showed that one in four employees did not understand tax-saving possibilities through benefits that form part of their salary breakup. The survey was conducted in top tier cities - Mumbai, Pune, Bangalore, Chennai, Kolkata and Hyderabad.
The salaried class can avail of several expense-based exemptions to reduce their tax burden. The entire list of exemptions is available in this link - https://goo.gl/PqVWhQ
Out of the various tax-saving benefits on medical, communication, fuel, leave-travel allowance, meal vouchers and gift, employees preferred using medical and communication the most. The least popular were tax-saving benefits on meal and gift vouchers; reasons being limited acceptance of the vouchers, storage difficulties and limited validity.
But is lack of awareness the only reason for employees to not opt for tax-saving benefits? Not so. The survey found that processing-time of claims was the biggest reason why employees opt out of reimbursements. 71% of the companies surveyed took 8 days or more to process each claim. Even for completing the claim process, the employee had to get 2 or more approvals which lengthened the claim process. Employees stated tracking the status of claims, completing the one or more approvals for claim processing and storing bills as key challenges faced while half of the employees stated the process as ‘too complex’.
Ramki Gaddipati, chief technology officer and co-founder of Zeta says, “Due to the complex time-consuming paperwork, many employees prefer to opt out of the benefit because they are not able to derive a value for the benefit.”
What did the Employer have to say?
Employers’ didn’t find the long processing time for claims a major concern. Yet, 35% of the companies surveyed had discontinued one or more reimbursements. Why? High running costs, high employee opt-out and managing logistics of bills were top 3 reasons for discontinuing the reimbursements. Two out of three companies felt that the time and cost spent on administering tax benefits exceeded actual benefits to employees. Also, invalid or illegible bills submitted by employees were another major issue companies faced. Difficulties in handling of intensive paperwork related to the reimbursement process delays the claim-processing time. Employees rather choose to forgo saving tax than go through the claim process.
When business processes are going digital, including the filing of tax-returns, why is it that companies are still using dated paper-based processes to reimburse tax-saving benefits? 94% of the companies surveyed used a paper-based process compared to only 6% that had turned reimbursement management completely digital.
“Although we have several employee benefits in place, the lack of digitisation is an area of concern given the fact that we have a young & tech-savvy workforce in the country. Most importantly, a digital transition will ensure faster processes, significant cost savings for companies and transparent functioning,” Ramki added.