Taxable value of free food and beverages provided by the employer (as set, 1961 Act, AY 2018-19)

Where the charge comes from

Free food and non-alcoholic drinks given to an employee are a fringe benefit prescribed under section 17(2)(viii), and their value is fixed by the Income-tax Rules, 1962, rule 3(7)(iii) (as substituted by the Income-tax (13th Amendment) Rules, 2009, in force from assessment year 2010-11). The rule applies to every employee.

General rule of valuation

The perquisite is what the employer spends on the food and beverages, less any amount the employee pays for them.

Food and drink that is not taxed

1. Food and non-alcoholic drinks supplied by the employer during working hours at the office or business premises, or given through paid vouchers that cannot be transferred and can be used only at eating places, up to ₹50 a meal. Anything above ₹50 a meal is taxed.
2. Tea or snacks given during working hours.
3. Food and non-alcoholic drinks given during working hours at a remote area or an offshore installation.

Example

An employer provides lunch in the office canteen at a cost of ₹80 a meal for 250 working days and recovers ₹10 a meal from the employee. The exempt part is ₹50 a meal, so the taxable perquisite is (₹80 − ₹50 − ₹10) × 250 = ₹5,000. Tea served at work is not taxed at all.