Hi all,
I have been seeing a lot of confusion on meal voucher law in this forum. I want to share my understanding for the larger interest of the community here. My opinion is based on the government notification dated December 2009 and effective since April 2009 without further amendments whatsoever.
1) Meal allowance can be paid in two ways to employees, which are considered tax-exempt for employees:
(a) Have a canteen and provide them food. The cost of food is tax-exempt. This, according to me, is the age-old system but proven over time and is the safest and advisable unless you want to take chances with the law.
(b) Provide meal vouchers that fulfill the following conditions:
a) Is usable only for "food and non-alcoholic beverages."
b) Is usable during working hours - Today, modern format stores link your voucher numbers to purchase bills. Also, voucher companies keep records of vouchers issued to employees, which is now mandatory. Hence, beware if you are using it for non-food items or during non-working hours. You as well as your company can face embarrassment. I have seen this happening to some companies during tax audits.
c) Provided at the rate of Rs. 50 per meal - a common myth is to provide 2 meals a day and hence provide at the rate of Rs. 100. But, can you legally establish that your employees stay in the office for such long hours that they have both their lunch and dinner in the office?
2) Wait for DTC to come in by April 2011 to see if this will be tax-exempt at all then.
3) Do not forget to take a legal opinion from your own lawyer before deciding rather than getting carried away by marketing gimmicks of vendors.
4) The acid test is to see how these vendors structure the meal allowance for their employees today. I am sure they would not be giving more than the limits mentioned as per my opinion. Even if they were providing more than these limits till last year, they would have made necessary changes this year.
Hope this helps all of you. Would like to answer if there are queries. I am sure most of you using vouchers would not be comfortable, but this is the truth. Expecting your comments if any.
Regards,
SM
I have been seeing a lot of confusion on meal voucher law in this forum. I want to share my understanding for the larger interest of the community here. My opinion is based on the government notification dated December 2009 and effective since April 2009 without further amendments whatsoever.
1) Meal allowance can be paid in two ways to employees, which are considered tax-exempt for employees:
(a) Have a canteen and provide them food. The cost of food is tax-exempt. This, according to me, is the age-old system but proven over time and is the safest and advisable unless you want to take chances with the law.
(b) Provide meal vouchers that fulfill the following conditions:
a) Is usable only for "food and non-alcoholic beverages."
b) Is usable during working hours - Today, modern format stores link your voucher numbers to purchase bills. Also, voucher companies keep records of vouchers issued to employees, which is now mandatory. Hence, beware if you are using it for non-food items or during non-working hours. You as well as your company can face embarrassment. I have seen this happening to some companies during tax audits.
c) Provided at the rate of Rs. 50 per meal - a common myth is to provide 2 meals a day and hence provide at the rate of Rs. 100. But, can you legally establish that your employees stay in the office for such long hours that they have both their lunch and dinner in the office?
2) Wait for DTC to come in by April 2011 to see if this will be tax-exempt at all then.
3) Do not forget to take a legal opinion from your own lawyer before deciding rather than getting carried away by marketing gimmicks of vendors.
4) The acid test is to see how these vendors structure the meal allowance for their employees today. I am sure they would not be giving more than the limits mentioned as per my opinion. Even if they were providing more than these limits till last year, they would have made necessary changes this year.
Hope this helps all of you. Would like to answer if there are queries. I am sure most of you using vouchers would not be comfortable, but this is the truth. Expecting your comments if any.
Regards,
SM