Dear HR Managers,
I would like to inform all of you that if you are issuing meal vouchers to your employees in India, you need to look at the fine prints that the voucher companies have mentioned on the contract as well as on the back of the vouchers to indemnify themselves from the risk that you as a company might be taking on yourself / on your employees.
As per IT notification dated December 2009, Meal value is not taxable in the hands of the employees if
1) Free / subsidized meals are provided by the company to the employees
2) If the allowance is provided through meal vouchers that fulfills the following criteria
a) Should not be transferable
b) Should be usable only in eating joints - No grocery purchase
c) Usable only at the rate of Rs 50/- per meal
d) used during working hours by the employees
These conditions are well understood by the voucher companies and appropriate statements are included in the "terms and conditions" section of the contract, behind each meal voucher and on their website that protects them well. The tone of the notification clearly points at promoting canteen setups within the companies. Next time your Sodexo sales guy tells you to issue meal vouchers to your employee at the rate of more than Rs 50/- per meal, do check the following from him
1) At what rate is his own company providing meal allowance to him ? is this lower than what he used to get till December 2009? Ask for proofs and be careful about the legal opinion they will flash from a rather seedy lawyer.
2) Can they indemnify your company if the employees are penalised for mis-use? Can your employees transfer the vouchers and use if for grocery purchase in retails malls and also exhaust the entire booklet in one shot?
3) Are the vouchers going to be treated at par with cash in their outlets? if not, think if you are indeed profitable after saving tax on the voucher and paying at a higher rate for your purchases. Think about the hassles, risk of loss, advance payment... My calculation says, on an average all your employees would save ~14% tax and lose well over 16%
Recently, I came to know from some sources that the Income tax department has taken the mis-use of meal voucher by employees very seriously and are working on steps that may lead to penal action. I would like you all to take legal advice and be safe. But yes, I have only raised issues with meal vouchers. I am sure you would be looking for solutions. I suggest the following solutions
1) Focus on your own cafeteria and provide a free / a subsidised meals to your employees. Employees not using the cafeteria could be compensated. this can be easily done if you manage this electronically. Camp card solution (P) Ltd Mumbai. has done it for us. You can also approach others as well like Miracle software (P) Ltd, Pune, all leading banks, Cubex India solutions etc. Banks like HDFC, Citi, Axis have their meal cards which you can provide to your employees and ask the bank to deploy their card terminal in your cafeteria and restrict usage of the card on that terminal only. However, in campus transactions, smart card especially contact less cards scores over magnetic strip cards of the bank. I would recommend Campcard's system both in terms of their quality, focus on product, service standards as well as their overall understanding on meal allowance laws.
2) Provide meal vouchers to your employees and launch an awareness campaign amongst the employees with the conditions of usage and take written commitments from them on the usage.
I would welcome some other HR managers to contribute to this so that I can post a ready reckoner on meal vouchers for everybody's reference and also update the same on an ongoing basis. I have mentioned one topic and wish similar other topics relevant for HR managers be picked up and championed by our fellow colleagues for the larger benefit!
Warm regards,
Manjari
I would like to inform all of you that if you are issuing meal vouchers to your employees in India, you need to look at the fine prints that the voucher companies have mentioned on the contract as well as on the back of the vouchers to indemnify themselves from the risk that you as a company might be taking on yourself / on your employees.
As per IT notification dated December 2009, Meal value is not taxable in the hands of the employees if
1) Free / subsidized meals are provided by the company to the employees
2) If the allowance is provided through meal vouchers that fulfills the following criteria
a) Should not be transferable
b) Should be usable only in eating joints - No grocery purchase
c) Usable only at the rate of Rs 50/- per meal
d) used during working hours by the employees
These conditions are well understood by the voucher companies and appropriate statements are included in the "terms and conditions" section of the contract, behind each meal voucher and on their website that protects them well. The tone of the notification clearly points at promoting canteen setups within the companies. Next time your Sodexo sales guy tells you to issue meal vouchers to your employee at the rate of more than Rs 50/- per meal, do check the following from him
1) At what rate is his own company providing meal allowance to him ? is this lower than what he used to get till December 2009? Ask for proofs and be careful about the legal opinion they will flash from a rather seedy lawyer.
2) Can they indemnify your company if the employees are penalised for mis-use? Can your employees transfer the vouchers and use if for grocery purchase in retails malls and also exhaust the entire booklet in one shot?
3) Are the vouchers going to be treated at par with cash in their outlets? if not, think if you are indeed profitable after saving tax on the voucher and paying at a higher rate for your purchases. Think about the hassles, risk of loss, advance payment... My calculation says, on an average all your employees would save ~14% tax and lose well over 16%
Recently, I came to know from some sources that the Income tax department has taken the mis-use of meal voucher by employees very seriously and are working on steps that may lead to penal action. I would like you all to take legal advice and be safe. But yes, I have only raised issues with meal vouchers. I am sure you would be looking for solutions. I suggest the following solutions
1) Focus on your own cafeteria and provide a free / a subsidised meals to your employees. Employees not using the cafeteria could be compensated. this can be easily done if you manage this electronically. Camp card solution (P) Ltd Mumbai. has done it for us. You can also approach others as well like Miracle software (P) Ltd, Pune, all leading banks, Cubex India solutions etc. Banks like HDFC, Citi, Axis have their meal cards which you can provide to your employees and ask the bank to deploy their card terminal in your cafeteria and restrict usage of the card on that terminal only. However, in campus transactions, smart card especially contact less cards scores over magnetic strip cards of the bank. I would recommend Campcard's system both in terms of their quality, focus on product, service standards as well as their overall understanding on meal allowance laws.
2) Provide meal vouchers to your employees and launch an awareness campaign amongst the employees with the conditions of usage and take written commitments from them on the usage.
I would welcome some other HR managers to contribute to this so that I can post a ready reckoner on meal vouchers for everybody's reference and also update the same on an ongoing basis. I have mentioned one topic and wish similar other topics relevant for HR managers be picked up and championed by our fellow colleagues for the larger benefit!
Warm regards,
Manjari