Hi All,
Our organization consists of around 700 employees and is issuing food coupons worth Rs. 1300 to all. I would like to know if we need to issue food coupons even though we have a canteen. I am under the impression that food coupons are issued on a Rs. 50 per meal basis when the employer cannot provide a food facility, and it is tax-exempted.
Ramesh
From India, Mumbai
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1Our organization consists of around 700 employees and is issuing food coupons worth Rs. 1300 to all. I would like to know if we need to issue food coupons even though we have a canteen. I am under the impression that food coupons are issued on a Rs. 50 per meal basis when the employer cannot provide a food facility, and it is tax-exempted.
Ramesh
From India, Mumbai
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Dear Mr. Br_Babu 1978 (Ramesh),
The matter of having a canteen is not an issue. One form of food coupons that can be given to employees is "Sodexo Coupons" to meet food expenses, which are non-taxable.
Is your company providing food coupons to employees from their CTC to save tax? If not, you may consider doing so. The coupons can be used in the canteen to provide food facilities to employees. There is no limit on these food/Sodexo coupons, but there needs to be a specific amount designed to structure a reasonable amount that can be given to all employees who fall under tax brackets.
For example, an amount (as per your suggestion) of Rs. 50/- per day should cost 50 * working days = the desired amount. Since it is tax-exempt, please ensure that an unreasonable value of coupons does not exceed the employer's expenses.
From India, Visakhapatnam
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The matter of having a canteen is not an issue. One form of food coupons that can be given to employees is "Sodexo Coupons" to meet food expenses, which are non-taxable.
Is your company providing food coupons to employees from their CTC to save tax? If not, you may consider doing so. The coupons can be used in the canteen to provide food facilities to employees. There is no limit on these food/Sodexo coupons, but there needs to be a specific amount designed to structure a reasonable amount that can be given to all employees who fall under tax brackets.
For example, an amount (as per your suggestion) of Rs. 50/- per day should cost 50 * working days = the desired amount. Since it is tax-exempt, please ensure that an unreasonable value of coupons does not exceed the employer's expenses.
From India, Visakhapatnam
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If you are providing a canteen facility with a reasonable range of food items, there is no need to provide food coupons. I have not come across any statutory provision on this issue. Of course, a canteen needs to be provided under the Factories Act in a factory employing more than 250 workers.
B. Saikumar
Mumbai
From India, Mumbai
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B. Saikumar
Mumbai
From India, Mumbai
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As mentioned by Sharmila, food coupons are exempted under the IT Act for a reasonable amount for the total working days in a month. In one of my ex-companies, it was given for ₹1300 per month, and it was tax-exempt. However, if the company provides free or highly subsidized meals to its employees in its canteen, then coupons cannot be given under the tax-exempt category, as it amounts to a dual facility.
From India, Mumbai
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From India, Mumbai
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Food vouchers and the canteen have different objectives and purposes; they are not substitutes for each other.
The canteen is mandatory if you are a factory under the Factories Act and employ more than 250 workers ordinarily.
A food voucher is an option adopted by the employer to provide tax benefits to employees within the provisions of the IT Act.
Regards,
Shailesh Parikh
Vadodara, Gujarat
99 98 97 10 65
From India, Mumbai
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The canteen is mandatory if you are a factory under the Factories Act and employ more than 250 workers ordinarily.
A food voucher is an option adopted by the employer to provide tax benefits to employees within the provisions of the IT Act.
Regards,
Shailesh Parikh
Vadodara, Gujarat
99 98 97 10 65
From India, Mumbai
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Shailesh,
Food vouchers can be provided for any amount by any company. The question is regarding its taxability. As per IT Act provisions, it will be considered for exemption only if a fully paid canteen facility is not provided by the company.
Generally, you will find IT/BPO/ITES companies give Sodexo coupons or meal cards since they do not provide canteen facilities at the company's cost. Since the meals are to be purchased by employees at their own cost, meal coupons provided by such companies will be tax-exempt to a reasonable extent.
From India, Mumbai
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Food vouchers can be provided for any amount by any company. The question is regarding its taxability. As per IT Act provisions, it will be considered for exemption only if a fully paid canteen facility is not provided by the company.
Generally, you will find IT/BPO/ITES companies give Sodexo coupons or meal cards since they do not provide canteen facilities at the company's cost. Since the meals are to be purchased by employees at their own cost, meal coupons provided by such companies will be tax-exempt to a reasonable extent.
From India, Mumbai
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Dear Dixon,
I fully agree with Shailesh. Moreover, food vouchers can be a part of CTC and to an extent tax-free; yet a company can give more than the IT exemption limit. It is not a substitute for canteen facilities. Also, even if many IT/ITES companies may not have a canteen within their premises, they provide free meal facilities arranged by caterers. I personally am aware of many such companies in Gurgaon and Noida. Good companies provide maximum facilities to their employees to provide a quality work life; whereas some smaller badly managed companies may think of curtailing such benefits.
Warm regards.
From India, Delhi
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I fully agree with Shailesh. Moreover, food vouchers can be a part of CTC and to an extent tax-free; yet a company can give more than the IT exemption limit. It is not a substitute for canteen facilities. Also, even if many IT/ITES companies may not have a canteen within their premises, they provide free meal facilities arranged by caterers. I personally am aware of many such companies in Gurgaon and Noida. Good companies provide maximum facilities to their employees to provide a quality work life; whereas some smaller badly managed companies may think of curtailing such benefits.
Warm regards.
From India, Delhi
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It appears from the discussion above that tax exemption, among other factors, is the key determinative factor in providing food coupons. I would like to ask, for my information, whether a company does not get tax exemption on the expenses which it incurs in running a canteen and for providing a subsidy (as developmental/welfare expenditure or under some other appropriate item). If so, can it claim exemption both on account of the canteen as well as on account of food coupons? If not, why should it provide food coupons when it runs a canteen?
B. Saikumar
Mumbai
From India, Mumbai
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B. Saikumar
Mumbai
From India, Mumbai
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Dear Ramesh,
Instead of levying the employees in the Tax band, you can directly supply morning and evening tea, snacks, along with lunch to all the employees of your organization. You can book the expenditure incurred on the Staff Welfare Account Code, which will help you save on taxes for your organization.
From India, Kumbakonam
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Instead of levying the employees in the Tax band, you can directly supply morning and evening tea, snacks, along with lunch to all the employees of your organization. You can book the expenditure incurred on the Staff Welfare Account Code, which will help you save on taxes for your organization.
From India, Kumbakonam
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Dear Mr. Saikumar,
Food coupons are given predominantly to provide IT exemption to employees. Some companies issue coupons irrespective of whether they run a canteen. As you are aware, these coupons are redeemed by employees at food outlets, departmental stores, etc., and are exempted from IT. Companies provide this as a fringe benefit. In my opinion, the company can consider the expenses incurred for running a canteen under employee welfare.
Regards,
M.V. Kannan
From India, Madras
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Food coupons are given predominantly to provide IT exemption to employees. Some companies issue coupons irrespective of whether they run a canteen. As you are aware, these coupons are redeemed by employees at food outlets, departmental stores, etc., and are exempted from IT. Companies provide this as a fringe benefit. In my opinion, the company can consider the expenses incurred for running a canteen under employee welfare.
Regards,
M.V. Kannan
From India, Madras
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Dear Kannan,
Thanks for your response. My question is from the employer's point of view. If a company receives an exemption for incurring expenses for running a canteen and providing subsidies on food items under Income Tax, can it claim exemptions for canteen and food coupons under different items of exemption? If not, is the employer providing the food coupons solely to provide income tax relief to employees by not paying for these expenses through salary? This is for my information and learning.
B. Saikumar HR & Labour Law Advisor Mumbai
From India, Mumbai
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Thanks for your response. My question is from the employer's point of view. If a company receives an exemption for incurring expenses for running a canteen and providing subsidies on food items under Income Tax, can it claim exemptions for canteen and food coupons under different items of exemption? If not, is the employer providing the food coupons solely to provide income tax relief to employees by not paying for these expenses through salary? This is for my information and learning.
B. Saikumar HR & Labour Law Advisor Mumbai
From India, Mumbai
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Hi All..!!
There seems to be lot of confusions wrt taxation of meal coupons. Have found an article in Simple Tax India, which is copied below for the benefit of members. Hope this clarifies your doubts..!! :)
Quote
There are a number of organizations which are issuing food coupons/meal vouchers to employees each month not adhering to perquisite valuation rules issued by the Income Tax Department. Let us examine the text of the perquisite valuation rule governing issuance of meal vouchers and study the underlying conditions that are to be satisfied for availing tax exemption on meal vouchers.
The perquisite valuation rule governing issuance of meal vouchers is as follows.
(iii) The value of free food and non-alcoholic beverages provided by the employer to an employee shall be the amount of expenditure incurred by such employer. The amount so determined shall be reduced by the amount, if any, paid or recovered from the employee for such benefit or amenity:
Provided that nothing contained in this clause shall apply to free food and non-alcoholic beverages provided by such employer during working hours at office or business premises or through paid vouchers which are not transferable and usable only at eating joints, to the extent the value thereof either case does not exceed fifty rupees per meal or to tea or snacks provided during working hours or to free food and non-alcoholic beverages during working hours provided in a remote area or an off-shore installation.
The above rule (Rule 3(7)(iii)) states that value of free food and non-alcoholic beverages or meal vouchers provided by the employer is exempt from income tax to the extent of Rs. 50 per meal. Please note that the tax exemption is to be calculated on a per-meal basis and not on a per-month basis. We find many organizations providing meal vouchers to the extent of Rs. 3,000 per month and not calculating any tax on the same. Some payroll managers argue that Rs. 50 per meal translates into Rs. 100 per day (assuming two meals per day) and finally into Rs. 3,000 per month (for 30 days) and hence meal vouchers are exempt to the extent of Rs. 3,000 per month.
For a meal voucher to be tax exempt to the extent of Rs. 50 per meal, the meal voucher should be used only during working hours. If an employee consumes two meals a day using meal vouchers in a working day and works for 22 days in a month (excluding holidays on Saturdays and Sundays), then meal vouchers can be tax exempt only to the extent of Rs. 2,200 per month (Rs. 50 per meal x 2 x 22 days). If the organization provides meal vouchers worth Rs. 3,000 for the month, then Rs. 800 (Rs. 3,000 – Rs. 2,200) shall be taxable in the hands of the employee.
“Meal” in this case should be understood to refer to breakfast, lunch, and dinner.
Please note that there is no restriction in Rule 3(7)(iii) on how many “meals” can be consumed each day for availing the Rs. 50 per meal exemption limit. One or two “meals” per day during working hours could be considered as reasonable.
In addition, the meal vouchers issued to employees should be non-transferable and used only in eating joints. Since tax exemption is restricted to Rs. 50 per meal, payroll managers would do well to issue meal vouchers only in Rs. 50 (or less) denomination. Issuance of meal vouchers of higher denomination (say, Rs. 100) may attract tax.
At the end of each month, payroll managers should make note of loss of pay and other leave days (Casual Leave etc.) of employees and correspondingly calculate the perquisite value for the meal vouchers issued.
While employers cannot keep track of whether food coupons/meal vouchers are used only during working hours and only in eating joints, payroll managers should inform employees regarding the tax rule governing meal vouchers, and ask employees to adhere to the rules from their end.
Unquote
Best Regards,
Divakar
From India, Bangalore
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There seems to be lot of confusions wrt taxation of meal coupons. Have found an article in Simple Tax India, which is copied below for the benefit of members. Hope this clarifies your doubts..!! :)
Quote
There are a number of organizations which are issuing food coupons/meal vouchers to employees each month not adhering to perquisite valuation rules issued by the Income Tax Department. Let us examine the text of the perquisite valuation rule governing issuance of meal vouchers and study the underlying conditions that are to be satisfied for availing tax exemption on meal vouchers.
The perquisite valuation rule governing issuance of meal vouchers is as follows.
(iii) The value of free food and non-alcoholic beverages provided by the employer to an employee shall be the amount of expenditure incurred by such employer. The amount so determined shall be reduced by the amount, if any, paid or recovered from the employee for such benefit or amenity:
Provided that nothing contained in this clause shall apply to free food and non-alcoholic beverages provided by such employer during working hours at office or business premises or through paid vouchers which are not transferable and usable only at eating joints, to the extent the value thereof either case does not exceed fifty rupees per meal or to tea or snacks provided during working hours or to free food and non-alcoholic beverages during working hours provided in a remote area or an off-shore installation.
The above rule (Rule 3(7)(iii)) states that value of free food and non-alcoholic beverages or meal vouchers provided by the employer is exempt from income tax to the extent of Rs. 50 per meal. Please note that the tax exemption is to be calculated on a per-meal basis and not on a per-month basis. We find many organizations providing meal vouchers to the extent of Rs. 3,000 per month and not calculating any tax on the same. Some payroll managers argue that Rs. 50 per meal translates into Rs. 100 per day (assuming two meals per day) and finally into Rs. 3,000 per month (for 30 days) and hence meal vouchers are exempt to the extent of Rs. 3,000 per month.
For a meal voucher to be tax exempt to the extent of Rs. 50 per meal, the meal voucher should be used only during working hours. If an employee consumes two meals a day using meal vouchers in a working day and works for 22 days in a month (excluding holidays on Saturdays and Sundays), then meal vouchers can be tax exempt only to the extent of Rs. 2,200 per month (Rs. 50 per meal x 2 x 22 days). If the organization provides meal vouchers worth Rs. 3,000 for the month, then Rs. 800 (Rs. 3,000 – Rs. 2,200) shall be taxable in the hands of the employee.
“Meal” in this case should be understood to refer to breakfast, lunch, and dinner.
Please note that there is no restriction in Rule 3(7)(iii) on how many “meals” can be consumed each day for availing the Rs. 50 per meal exemption limit. One or two “meals” per day during working hours could be considered as reasonable.
In addition, the meal vouchers issued to employees should be non-transferable and used only in eating joints. Since tax exemption is restricted to Rs. 50 per meal, payroll managers would do well to issue meal vouchers only in Rs. 50 (or less) denomination. Issuance of meal vouchers of higher denomination (say, Rs. 100) may attract tax.
At the end of each month, payroll managers should make note of loss of pay and other leave days (Casual Leave etc.) of employees and correspondingly calculate the perquisite value for the meal vouchers issued.
While employers cannot keep track of whether food coupons/meal vouchers are used only during working hours and only in eating joints, payroll managers should inform employees regarding the tax rule governing meal vouchers, and ask employees to adhere to the rules from their end.
Unquote
Best Regards,
Divakar
From India, Bangalore
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Please note,
Both benefits, i.e., canteen facility (free or subsidized) and free meal coupons, cannot be provided to employees and claimed as an exemption. Rule 3(7)(iii) of the IT Act is clear that free food or non-alcoholic beverages provided to employees during working hours, at the office or business premises or through paid vouchers.
This benefit is not cumulative, i.e., providing free food in the canteen as well as giving food coupons. It seems to be a misinterpretation of the law! If these expenses are found out, they can be disallowed for IT purposes in the employer's books as well.
Best Regards,
Divakar
From India, Bangalore
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Both benefits, i.e., canteen facility (free or subsidized) and free meal coupons, cannot be provided to employees and claimed as an exemption. Rule 3(7)(iii) of the IT Act is clear that free food or non-alcoholic beverages provided to employees during working hours, at the office or business premises or through paid vouchers.
This benefit is not cumulative, i.e., providing free food in the canteen as well as giving food coupons. It seems to be a misinterpretation of the law! If these expenses are found out, they can be disallowed for IT purposes in the employer's books as well.
Best Regards,
Divakar
From India, Bangalore
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Dear Diwakar Shetty Thanks a lot for sharing a vital and useful input on canteens and food coupons and clarifying it from income tax perspective. Excellent. B.Saikumar HR & labour Law Advisor Mumbai
From India, Mumbai
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From India, Mumbai
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Dear Sharmila,
I think food coupons aren't being taken into account in the process of the salary account; hence, they will automatically be exempted from Income Tax. The issue is that since the company has provided a canteen facility to its workers, food coupons are provided for the purchase of food through the canteen. Some companies do provide a canteen facility for a nominal charge for food items, which is based on the subsidy provided to the canteens. Some canteens operate on a no-profit-no-loss system, where employees have to pay charges for food items.
Thank you.
From India, Jamshedpur
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I think food coupons aren't being taken into account in the process of the salary account; hence, they will automatically be exempted from Income Tax. The issue is that since the company has provided a canteen facility to its workers, food coupons are provided for the purchase of food through the canteen. Some companies do provide a canteen facility for a nominal charge for food items, which is based on the subsidy provided to the canteens. Some canteens operate on a no-profit-no-loss system, where employees have to pay charges for food items.
Thank you.
From India, Jamshedpur
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As I am aware of the canteen facility in any company, coupons are only allowed for guests or non-employees. Canteen employees punch their card, and the software deducts the amount from their salary at a fixed rate (practice in my company). I think the canteen amount does not come under CTC. The company can fix a rate per meal, and deductions may occur once a month at salary time.
Regards,
Monu
From India, Noida
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Regards,
Monu
From India, Noida
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One may find it impressive to see such issues of Employee Welfare being discussed so threadbare and in-depth. In fact, even the IT department has not looked into these issues with such a magnifying glass. One has not heard of any employer or employee being penalized for extending these benefits to the employees.
So, the point at issue here is not about tax compliances; as it is common knowledge how even big companies have been finding ways to avoid taxes, worth several thousand crores of Rupees; and such cases make headline news. One is constrained to think that the real issue for HRs here is how to curtail or reduce employee benefits and get a pat or reward from the management. I beg your pardon in case it offends some HRs.
Warm regards.
From India, Delhi
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So, the point at issue here is not about tax compliances; as it is common knowledge how even big companies have been finding ways to avoid taxes, worth several thousand crores of Rupees; and such cases make headline news. One is constrained to think that the real issue for HRs here is how to curtail or reduce employee benefits and get a pat or reward from the management. I beg your pardon in case it offends some HRs.
Warm regards.
From India, Delhi
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Dear Mr. Kannan,
Food coupons are not devised to get income tax benefits. Income tax benefits are provided if meal vouchers are given to purchase food (not groceries in a departmental store) when free food is not provided. Canteens are compulsory for a factory employing 250 workers or more; hence, for all other categories, the meal voucher concept was introduced.
There are companies that provide Rs 5,000/- worth vouchers but still don't tax them. It is for the tax department to check these issues, but this does not mean that they are legally and morally correct. I have observed IT companies paying their employees more than Rs 10K as conveyance allowance and not taxing it, regardless of whether they own a vehicle or not. If we argue that many evade taxes, we may not progress further. Employee benefits or welfare should not be the reason for taking such a stand.
From India, Bangalore
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Food coupons are not devised to get income tax benefits. Income tax benefits are provided if meal vouchers are given to purchase food (not groceries in a departmental store) when free food is not provided. Canteens are compulsory for a factory employing 250 workers or more; hence, for all other categories, the meal voucher concept was introduced.
There are companies that provide Rs 5,000/- worth vouchers but still don't tax them. It is for the tax department to check these issues, but this does not mean that they are legally and morally correct. I have observed IT companies paying their employees more than Rs 10K as conveyance allowance and not taxing it, regardless of whether they own a vehicle or not. If we argue that many evade taxes, we may not progress further. Employee benefits or welfare should not be the reason for taking such a stand.
From India, Bangalore
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