The Income-tax Act, 2025, along with the Income-tax Rules, 2026, introduces a revised framework for taxation of salary and perquisites. One important change concerns the tax treatment of free food, non-alcoholic beverages and meal vouchers provided by employers.
The new law comes into force from 1 April 2026. Accordingly, the provisions apply to income relating to Tax Year 2026-27 onwards.
What is the New Rule for Meal Benefits?
Under section 17 of the Income-tax Act, 2025, specified benefits and amenities provided by an employer can constitute perquisites. However, Rule 15 of the Income-tax Rules, 2026 provides specific relief for certain meal benefits.
Under Rule 15, the value of free food and non-alcoholic beverages provided by an employer during working hours at the office or business premises, or through qualifying paid vouchers usable only at eating joints, is not treated as a taxable perquisite to the extent the value does not exceed ₹200 per meal.
The rule also covers tea or snacks provided during working hours and certain food and beverage facilities provided during working hours in remote areas or at offshore installations.
₹200 is a Per-Meal Limit
The ₹200 threshold is a per-meal limit. It should not be interpreted as a monthly or annual exemption.
For example, if an employee receives an eligible meal costing ₹180, the entire amount falls within the prescribed limit.
If an eligible meal costs ₹260, the amount exceeding ₹200, i.e. ₹60, may be chargeable as a taxable perquisite, assuming all other conditions of the rule are satisfied.
Conditions for Availing the Benefit
The benefit is subject to the conditions prescribed under Rule 15. In particular, the food or beverages must be provided during working hours and the facility must fall within the specified modes of provision.
For meal vouchers, the vouchers must satisfy the prescribed conditions, including their permitted use at eating joints.
Therefore, employers should not automatically treat every payment described as a “meal allowance” or “food allowance” as exempt merely because the amount is ₹200 or less.
Example 1: Meal Voucher of ₹180
An employer provides an eligible meal voucher of ₹180 for a meal during working hours.
Taxable value: Nil, assuming the prescribed conditions are satisfied.
Example 2: Meal Voucher of ₹260
An employee receives an eligible meal worth ₹260.
Amount within prescribed limit: ₹200
Excess: ₹60
Subject to the other conditions of Rule 15, the excess ₹60 may be included in the taxable perquisite value.
What About Cash Meal Allowance?
A cash payment made to an employee as a meal allowance is different from a qualifying meal benefit covered by Rule 15.
For example, if an employer pays an employee ₹3,000 per month as a cash meal allowance, the payment does not become exempt merely because it is intended to meet food expenses. The tax treatment of the monetary allowance has to be considered under the general salary provisions.
Employers should therefore distinguish between:
- qualifying employer-provided food;
- qualifying meal vouchers; and
- cash allowances or reimbursements.
Is the Benefit Available under Both Tax Regimes?
The new Rules do not carry forward the earlier restriction that denied this benefit under the new tax regime. Accordingly, from 1 April 2026, the Rule 15 meal benefit is generally available under both tax regimes, subject to satisfaction of the prescribed conditions.
Impact on Employers and Payroll
Employers should review their payroll policies, meal voucher arrangements and perquisite calculations from Tax Year 2026-27.
Particular attention should be given to:
- whether the benefit is provided during working hours;
- whether food is provided at the office/business premises or through qualifying vouchers;
- whether voucher conditions are satisfied;
- whether the ₹200 limit is applied per meal;
- whether any amount is instead paid in cash; and
- appropriate reporting and TDS treatment.
For TDS purposes, the corresponding provision under the new Act is section 392, which deals with salary and accumulated balance due to an employee and includes provisions relating to non-monetary perquisites and furnishing prescribed particulars.
12. Practical checklist for employers
Employers intending to provide tax-efficient meal benefits may consider the following controls:
1. Use an appropriate meal-card/voucher arrangement
The instrument should satisfy the requirements prescribed under Rule 15.
2. Restrict usage
The card/voucher should be usable only for eligible meals at qualifying eating joints and should not function as a general-purpose payment instrument.
3. Ensure non-transferability
The terms of the arrangement should prevent transfer or gifting of the benefit where required by the prescribed conditions.
4. Monitor working hours
The benefit should be structured with the “during working hours” requirement in mind.
5. Configure payroll correctly
Payroll systems should distinguish the exempt/non-taxable portion from any taxable excess.
6. Maintain documentation
Employers should retain the meal-benefit policy, provider agreement, voucher/card terms, employee eligibility records and relevant payroll documentation.
Conclusion
The Income-tax Act, 2025 and Income-tax Rules, 2026 have significantly revised the framework governing employer-provided meal benefits. The key change is the increase of the prescribed meal value threshold to ₹200 per meal, together with the absence of the earlier restriction relating to the new tax regime.
However, the ₹200 threshold is not a blanket exemption for all food-related payments. The nature of the benefit, timing, mode of provision and other conditions under Rule 15 must be examined before determining its taxability.
This article is intended for general educational and informational purposes. The examples are illustrative and based on stated assumptions. The actual tax treatment may depend on the precise terms of employment, the nature of the benefit, the voucher arrangement and the facts of each case. Readers should refer to the Income-tax Act, 2025, Income-tax Rules, 2026 and applicable notifications/circulars for the relevant tax year.
Key Legal References
- Income-tax Act, 2025 – Section 17: provisions relating to perquisites.
- Income-tax Rules, 2026 – Rule 15(5)(a), Table IV, Serial No. 3: valuation/exclusion relating to free food and non-alcoholic beverages and qualifying meal vouchers.
- Income-tax Act, 2025 – Section 392: deduction of tax from salary and treatment/reporting of taxable perquisites.
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