Friday , 15 December 2017
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Payroll rules for food coupon/meal voucher

1.When to issue meal vouchers–beginning or end of the month?

In order to claim tax exemption, employees are supposed to use meal vouchers for consuming food during working hours. If an organization issues meal vouchers at the end of a month, it could be argued that the total amount of meal vouchers issued in that month shall be taxable in that month since there is no way the meal vouchers can be used by employees for consumption in that month. In such a case, tax exemption to the extent of Rs. 50 per meal, if applicable, can be claimed only in the next month.

2. Display in payslip.
Meal voucher–given that it is a non-cash perquisite–is to be kept out of the payslip. After all, we do not show the value of perquisites such as accommodation and car in the payslip.

3. Impact of loss of pay.
Value of meal vouchers should be adjusted for loss of pay in order to calculate the perquisite value of meal vouchers for taxation.

4.Meal vouchers as a flexi-pay component.
Some organizations allow employees to switch between meal vouchers and cash as and when employees wish. While there is nothing wrong in giving the flexibility to employees, payroll managers need to take cognizance of the additional administrative effort in managing issuance of meal vouchers and keeping track of the pay structure changes when employees switch from meal vouchers to cash and vice versa.

6. Meal vouchers in case of arrear pay.
Your organization may decide to include meal vouchers when there is a pay hike with retrospective effect. You may issue additional meal vouchers towards “meal voucher arrear” in case of a retrospective hike. But please note that the tax exemption can be availed only to the extent of Rs. 50 per meal.

About CA Karishma

I am a Chartered Accountant by profession and an avid teacher. Writing is my hobby and this blog is a platform to share knowledge and interact with prospective Chartered Accountants. I locate my work at the intersection of Chartered accountancy & education. I teach among others, Taxation at Tapasya Academy for CA, one of the premier institute for Chartered Accountancy course in Andhra Pradesh.

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