Yes, the free meal coupons like Sodexo are liable to tax. Our Income Tax law treats it as a free perquisite given by the employer to its employees and would be taxed if the value of the coupon exceeds Rs. 50 per meal.
If the value of the coupon exceeds Rs. 50 per meal then the excess value is taxable as a perquisite in the hands of the employee.
But if there is any free snacks/beverages provided during the business working hours of the organization then it will not be taxable.
What if the meal coupons are provided at a discounted rate and are not free?
In case the employer is giving discounted coupons but not free, then the perquisite will be taxable after deducting the amount paid by the employee from the amount in excess of Rs. 50 per meal.
For example, suppose you have received a food coupon worth Rs. 500 per meal, for which you paid Rs. 85 to your employer.
First, you will calculate the value of perquisite in excess of Rs. 50 per meal.
In this case it is, 500-50= 450 per meal.
Secondly, you will take into consideration the amount paid by you, which in our case is Rs. 85 per meal.
Now, the taxable value in your hands will be the net value of perquisite (food coupon) after deducting the amount paid by you.
So, this will be, 450 – 85 = 365
Thus, the net taxable value will be Rs. 365. This amount will be added to your salary while computing your total tax, if not already included.
Which section of the law states that the free meal coupons are taxable?
The taxability of the free meal coupons as perquisites is governed by Section 17(2)(viii) of the Income Tax Act.
The excerpt from the Act is given below,
|17(2)(viii) read with Rule 3(7)(iii)
|Free food and beverages provided to the employee
|1) Fully Taxable: Free meals in excess of Rs. 50 per meal less amount paid by the employee shall be a taxable perquisite
2) Exempt from tax: Following free meals shall be exempt from tax
You can also find the taxability of all the perquisites and allowances here.