Taxability of sodexo food coupons

Tax planning 9657 views 2 replies

CA Makrand Nashikkar

Senior Manager (Finance)

42 Points Joined February 2010

Hello,

Please reply ASAP.

I am particularly referring to SODEXO FOOD PASS. I would like to know whether SODEXO Food Coupons in particular is accepted as TAX-FREE Perquisite under the head 'Salary' upto the limit of Rs.50 per meal. I have some doubt whether income-tax authorities allow the same as exempt from salary in the hands of employee? I have not come across any case-law in this respect. Our orgn. is thinking of introducing it. But, I need to be absolutely sure before introducing SODEXO Food Pass. I had approached Sodexo Co. asking for exemption certificate from the income-tax dept. issued to them in this respect. But, they are not able to give conclusive evidence in this respect. They had sent me the relevant Income- Tax Rule (i.e. Rule 3(7) (iii) of the Income-Tax Rules, 1962). But, whether it is allowed by the ITO is my question. I need conclusive evidence to convince my management.

Futher, my next query is that it is specified in the above mentioned rule that Rs.50 per meal. Does the meal include breakfast, lunch and supper(dinner)? there is no clarity in the Act in this respect. If above is true, then Rs.150 per day (Rs.46,800/- per annum) will be exempt from tax. Sodexo Co. is claiming as such (i.e.Rs.150 per day)

Lastly, is the Sodexo Food Pass tax free, even if it is utilised anywhere in India or it should be utilised only in the Company Premises.

Thanking you in anticipation,

Regards,

Replies (2)

Devendra

Chartered Accountant

4780 Points Joined March 2009

1) Yes, the allowance is exempt. 2) As per my knowledge, the Sodexo coupon is exempt for Rs. 50 per meal per day and not Rs. 150 (breakfast + lunch + dinner). Regards, Devendra Kulkarni

CA ANKIT GADA

Tax Consultant

222 Points Joined December 2008

Rule (3)(7)(iii) dealing with such perquisites is reproduced here under for discussion.

‘The value of free food and non-alcoholic beverages provided by the employer to an employee shall be the amount of expenditure incurred by such employer. The amount so determined shall be reduced by the amount, if any, paid or recovered from the employee for such benefit or amenity:

Provided that nothing contained in this clause shall apply to free food and non-alcoholic beverages provided by such employer during working hours at office or business premises or through paid vouchers which are not transferable and usable only at eating joints, to the extent the value thereof in either case does not exceed fifty rupees per meal or to tea or snacks provided during working hours or to free food and non-alcoholic beverages during working hours provided in a remote area or an off-shore installation.’

As mentioned in the rule, the valuation of this perquisite is done taking the gross cost to the employer as reduced by an amount collected from the employee in this regards, i.e. at the net cost to employer. This perquisite is tax free only to the extent of Rs. 50 (max) per meal during the working hours. It is very important to understand that one has to consider the working hours of the organization to calculate the tax-free amount of this perquisite.

Sodexo coupons are actually paid vouchers referred in the proviso. However, most of employers don’t consider the words highlighted in the proviso reproduced above. The paid vouchers must be non-transferable and USABLE ONLY AT EATING JOINTS. The problem occurs here as sodexo coupons can be used not only at eating joints but also at other places like super/hypermarkets (eg. big bazaar). This means it can also be used for buying groceries or any other thing sold by such hypermarkets.

Hence, strictly going through the rule dealing with paid coupons, the intention of the legislature behind the said rule, sodexo (or any other such prepaid coupon which is usable at places other than eating joints also) are not tax free perquisite, in other-words are taxable perquisites.

However, if it is given as gift by employer to the employees and is not the part of the salary as perquisite, it can be considered as tax free provided its value is less than Rs. 5,000/-, under another rule.