Hi Seniors, here is a scenario on which I would request you to share your views.
Some of our on-roll employees sit at the client's place, and the client is providing them with internal meal coupons worth ₹64 per meal, which can be used only at the client's premises. They are neither "Sodexho coupons" nor "pre-paid electronic meal coupons."
Now the client has sent us the following mail and has asked us to deduct the tax from our employees in our books of account.
This is in reference to the Food Facility (Food Coupons) provided by the company.
As it has been made mandatory by the Income Tax Act 1961, if the cost of a meal provided by the company exceeds ₹50 per meal, then the entire (monthly) amount of the cost of lunch provided to the employee shall be subjected to tax deduction.
In our case, the cost of the coupon is about INR 64 = INR 56 + INR 8 (Tax @ 13.5%).
So the income of all the employees, whether on-rolls of the company or off-roll, who are availing of this benefit would be subjected to tax deduction as per their tax liability.
From the new financial year, starting from April 2011, the company would implement the tax deduction on the meal facility (it means in the July salary payout, there will be a tax deduction for 3 months: April - June).
P.S. The deduction will be done based on the immediate previous month's lunch coupon booklet issued, i.e., in April 2011, the deduction would be based on coupons issued for March 2011.
Now my question is:
1) Since these coupons are not issued by an Issuing Bank (** Issuing Bank - means a banking company which issues the coupon to the employee in pursuance of an agreement entered with the employer and has also entered into a contract with the member established authorizing him to allow purchases against the coupon, issued by it in accordance with the conditions stipulated in 115WB(2)(iii) and Rule 40(E) of Income Tax.) - How can the internal paper coupons be considered for tax deduction?
2) These coupons can only be used at client premises - Is it valid to add the value of paper coupons in employee income?
3) We, as a vendor, are not showing any value of meal coupons given to our employees as the meal is provided by the client - How can we add meal value in books of account if the food coupon is not provided by us?
4) Isn't this the liability of our client to show the value in their books of account as the food coupons given to our employees are just like a food coupon given to a guest if they visit our client?
Request to guide on the above points.
Regards,
Kumar Anand
HR - SAMSUNG
Some of our on-roll employees sit at the client's place, and the client is providing them with internal meal coupons worth ₹64 per meal, which can be used only at the client's premises. They are neither "Sodexho coupons" nor "pre-paid electronic meal coupons."
Now the client has sent us the following mail and has asked us to deduct the tax from our employees in our books of account.
This is in reference to the Food Facility (Food Coupons) provided by the company.
As it has been made mandatory by the Income Tax Act 1961, if the cost of a meal provided by the company exceeds ₹50 per meal, then the entire (monthly) amount of the cost of lunch provided to the employee shall be subjected to tax deduction.
In our case, the cost of the coupon is about INR 64 = INR 56 + INR 8 (Tax @ 13.5%).
So the income of all the employees, whether on-rolls of the company or off-roll, who are availing of this benefit would be subjected to tax deduction as per their tax liability.
From the new financial year, starting from April 2011, the company would implement the tax deduction on the meal facility (it means in the July salary payout, there will be a tax deduction for 3 months: April - June).
P.S. The deduction will be done based on the immediate previous month's lunch coupon booklet issued, i.e., in April 2011, the deduction would be based on coupons issued for March 2011.
Now my question is:
1) Since these coupons are not issued by an Issuing Bank (** Issuing Bank - means a banking company which issues the coupon to the employee in pursuance of an agreement entered with the employer and has also entered into a contract with the member established authorizing him to allow purchases against the coupon, issued by it in accordance with the conditions stipulated in 115WB(2)(iii) and Rule 40(E) of Income Tax.) - How can the internal paper coupons be considered for tax deduction?
2) These coupons can only be used at client premises - Is it valid to add the value of paper coupons in employee income?
3) We, as a vendor, are not showing any value of meal coupons given to our employees as the meal is provided by the client - How can we add meal value in books of account if the food coupon is not provided by us?
4) Isn't this the liability of our client to show the value in their books of account as the food coupons given to our employees are just like a food coupon given to a guest if they visit our client?
Request to guide on the above points.
Regards,
Kumar Anand
HR - SAMSUNG