As per rule 3(7)(iii), free food and non alcoholic beverages provided by employer to employee is tax free in certain cases if specified conditions to it are fulfilled.
Given below is a list of cases where value of perquisite provided by employer to employees should be considered as Nil.
- Tea or snacks provided during working hours
- Free food and non alcoholic beverages provided during working hours in a remote area or in an offshore installation.
If free food and non-alcoholic beverages provided by the employer in an office or business premises or through paid vouchers which are not transferable and usable only at eating joints during working hours, then the value of perquisite will be considered as Nil if the value of benefit to employee thereof in either case is up-to Rs 50 per meal.
This means expenditure on provision of free meals by the employer in excess of Rs 50 shall be treated as perquisite. If any amount has been recovered from employee, then it must be reduced by recoveries made from the employer.
In cases other than those discussed above, the value of perquisite should be the actual amount of expenditure incurred by the employee as reduced by the amount, if any paid or recovered from the employee for such benefit or amenity. Therefore, if any alcoholic beverages provided by the employer to employees, then the actual amount incurred by the employer will be considered as perquisite after taking out any amount recovered from employee. It does not matter whether alcoholic beverages provided by employer is during officer hours or not.
Based on the above provisions, taxable value of perquisite on free food and beverages are calculated and included in the gross salary of the employee to calculate tax liability. From gross salary, you can claim a deduction under section 16 to find out income under the head salaries.
