Your Guide to Meal Card Tax Savings and Other Benefits

Employers frequently offer food vouchers, such as meal cards, to their employees. These prepaid meal cards can be used by employees to purchase meals and non-alcoholic beverages, providing a convenient and tax-efficient way to enjoy free food. Additionally, these cards now offer the convenience of buying groceries, expanding their utility beyond dining to everyday shopping needs.

This card allows employees to use pre-tax salary for food expenses, providing a convenient and tax-efficient way to cover meal costs. As a result, many companies offer this meal card as an optional benefit, issuing it upon employee request.

What is a Meal Card?
The meal card is a type of perquisite an employer offers to employees. These prepaid coupons allow employees to buy food, groceries, and non-alcoholic beverages. Employees can use this card to purchase food or groceries without any out-of-pocket expenses, as the company includes this amount in the employees’ Cost to Company (CTC).

This digital card resembles a credit or debit card and requires activation before use.

Tax Advantages of the Meal Card
Many employees believe that meal cards are completely free from tax liability. However, this is not entirely accurate. According to Section 17(2)(viii) of the Income Tax Act, free meal cards are taxable if the expenditure per meal exceeds Rs.50. Employees are required to pay taxes on the amount that surpasses Rs.50 per meal. However, if your company provides free meals or snacks during working hours within office premises or a business organization, this benefit is not subject to taxation. Therefore, the tax-free amount for the meal card also depends on the working hours of your organization.

When you opt for a meal card, you need to   choose an expense limit, which sets the maximum amount you can spend with the card. The company adds this fixed amount to your CTC (Cost to Company) and deducts it from your take-home salary. This arrangement helps you save on taxes since you only pay income tax on your reduced take-home amount. Consequently, the amounts spent using the card are not subject to income tax

Tax Benefits of the Meal Card
As per Section 17(2)(viii) of the Income Tax Act, the following meals are eligible for a tax exemption under the meal card:

• Food and non-alcoholic beverages are offered by your employer within your working hours in an offshore installation or remote area.
• Non-alcoholic beverages like tea, coffee, and snacks provided during working hours are categorized as tax-free.
• Employer offering food through non-transferable paid vouchers that can be used only at food joints or in office premises is exempted from tax liability (the cost per meal should be within Rs.50).

By providing ‘Meal Allowance’ as a component of a registered employee’s compensation, the company provides its employees the benefits of a tax-free component in their compensation structure.

Ideal Meal Cards and tax savings thereon can be illustrated as below:

* The amounts are indicative and will be calculated as per your income tax slab.

* The amounts are indicative and will be calculated as per your income tax slab.

However, it’s important to note that this exemption is only available under the old tax regime and will be taxable under the new tax regime.

Wrapping Up
Now that you understand how the meal card works, you might be wondering whether you should use it.  If you live in tier 1 city, the answer is definitely yes. The card is widely accepted, and you’re likely to spend around ₹3,000 on groceries and food each month anyway. Using the card can help you save some money on taxes. Although you might need to plan your purchases initially, it becomes easier with time. Depending on your expenses, a meal card can effectively help you save taxes on your food and grocery purchases.