Change of Rules under the Income-Tax Act

Change of Rules under the Income-Tax Act

On July 3, 2020, the Central Board of Direct Taxes (CBDT) has made certain changes in rules for better governance.

Now, as per the new income tax regime 2020-21, the employees will be eligible to claim the exemption in taxes paid by way of paid vouchers given on the meal coupons. Contrary to the fact that as earlier the income tax department considered a free meal or beverages provided by an employer to employees during office hours to be a personal benefit to employees.

The new income slab provides for a lesser rate of tax for the assesses who opt for the scheme, for which the IT department has changed the guidelines for the persons who intend to claim exemptions on the taxes paid on the free meals given by the employer of the establishment. In the said notification, the IT department stated: "that the employees who opt for the new tax regime under section 115BAC will not be able to enjoy the advantages of taxes paid on such meal coupons or food vouchers”. Also, as per the new tax regime to be operative from the F.Y. 2020-21, no employee shall be able to claim exemptions on food coupons given by way of paid vouchers for the values up to the value is Rs. 50 per meal.

Generally, the employer of the establishment provides free meals or beverages to its employees during the hours of work which is regarded as a personal benefit and not shown as expenditure for the Income-tax Act 1961.

Further, allowances covered under the list of exemption of such as free meals or beverages have been withdrawn under the new tax regime.

However, below mentioned are the exemptions continued in effect as per the new rules for the benefit of employees-

1.    Costs related to free food and the non-alcoholic beverages provided by the employer during office hours in the work premises;

2.     Costs related to beverages and snacks delivered;

3.    Costs related to food and alcoholic beverages free of cost during working hours either in a remote area or an offshore installation.


Therefore, the above mention notification fulfills the purpose of clearly defining the tax treatment stating that except the free meals/ beverages/ meal coupons, etc. served by the employer to his employees, the tax treatment of other perquisites specified under rule 3, that includes rent-free accommodation, motor cars, free/concessional education, gifts, club membership, etc. will continue with the same under both the tax regimes prescribed i.e. the old and new tax rules.


eStartIndia Team

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