In order to make a tax-efficient salary structure for employees, organizations use to arrange meal coupons (or meal cards) for employees in agreement with companies providing meal coupons (or meal cards). Many organizations tie-up with coupon providers for prepaid food coupons (or meal cards) as part of CTC. Normally, organizations make it optional for employees, and those who do not want them can opt-out.
What are SODEXO Coupons?
SODEXO is one of the top world companies in its sector; it provides multiple types of organizations with meal passes, restaurant vouchers, mobility passes, leisure passes, book cards, etc.
It supports business strategies that improve the quality of life of individuals at work to positively impact the organization’s performance. It’s helping attract the best talent, deliver a great employee experience, and enhance operational excellence in every type of industry.
Tax Planning with SODEXO Food Coupons
Most of people understand that SODEXO food coupons (or meal cards) are exempt from tax in the entirety and the value of these coupons is not taxable in the hands of employees but this is the incorrect interpretation of the law.
Let us discuss how SODEXO food coupons (or meal cards) works and related provisions of Income Tax Law.
Rule – 3(7)(iii) of Income tax Rules
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.
Provided further that the exemption provided in the first proviso in respect of free food and non-alcoholic beverage provided by such employer through paid voucher shall not apply to an employee, being an assessee, who has exercised an option under sub-section (5) of section 115BAC.
Analysis of Provisions of Law
As mentioned above in the first Para of the rule, the value of perquisite will be the cost incurred by the employer reduced by the cost recovered from the employee (as a deduction from salary) i.e. the net cost to the employer.
Further, the employee cannot use SODEXO meal cards/coupons for alcoholic drinks.
In the first Proviso to the rule, it is provided that the value of free food and non-alcoholic beverages provided by the employer will be exempt from the total income of the employees if –
- Free food or non-alcoholic beverages are provided during the working hours or in business premises
- Paid coupons (or meal cards) are provided which are not transferable and usable only at eating joints
- The value of the meal does not exceed fifty rupees per meal.
Generally, organizations provide a monthly credit to the employees on the basis of the total no of working days on the basis of two meals per working day.
Example – Total no of working days in a Month 25 days
Value provided per Meal Rs. 50
No of Meals per Day 2
Total Value Credited per Month Rs. 2,500/-
Annual Value of Perquisite Rs. 30,000/-
It is important to note that employees cannot use these coupons or cards at any other outlet (other than an eating joint). People normally accumulate money in meal cards and use them for other items other than food items. Suppose, Mr. X went to Big Bazar and he also purchased regular grocery or stationery items from there and swiped its SODEXO card, which is not correct, and in such case, the entire value of perquisite is liable to tax in the hands of the employee.
SODEXO plays an important role here and it monitors its parties and instructs them to not allow swiping of meal cards for any other items (other than food). It is not clear whether meal cards can be used during public holidays or during weekends (i.e. during non-working days).
Further, a new proviso inserted by Finance Act 2020 (effective from Financial Year 2020-21), it is provided that the exemption available in the first proviso will not be available to the employees who opt for the new regime of taxation under Section 115BAC(5) of the Income-tax Act.
These provisions can provide material tax benefits to employees and they can even plan their taxable income in a better way (including adjustment of tax bracket) by using such options.
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