Draft Tax Rules Could Allow Rs 1.05 Lakh Tax-Free Meal Benefits For Salaried Employees

Many organisations offer meal benefits such as food coupons or prepaid cards (such as, Sodexo-type meal cards) as part of employee compensation packages. Under the current provisions of Section 17(2)(viii) of the Income Tax Act, employer-provided meals are treated as a taxable perquisite if their value exceeds Rs 50 per meal. This means any amount spent above Rs 50 per meal is added to the employee's taxable income.

However, the Draft Income Tax Rules, 2026 have proposed to increase the tax-free threshold for employer-sponsored meals from Rs 50 per meal to Rs 200 per meal.
Although this proposal is yet to be finalised, it signals a significant shift in how meal-related employee benefits could be taxed in the future. If approved by Parliament, the revised limit could allow salaried individuals to claim a substantially higher tax exemption on meal benefits provided by their employers.

Potential Tax-Free Benefit Of Up To Rs 1,05,600 Per Year

According to tax experts, the impact of this proposed change could be meaningful when calculated annually.

If an employer provides two meals per working day, the exemption could work like this:

Rs 200 × 2 meals per day = Rs 400 per day

Rs 400 × 22 working days = Rs 8,800 per month

Rs 8,800 × 12 months = Rs 1,05,600 per year

This means employees could receive meal benefits worth up to Rs 1,05,600 annually without it being added to their taxable income, provided the new rule comes into effect.

Real-World Tax Impact (Old Tax Regime)

With a standard deduction of Rs 75,000, the potential tax savings could look like this:

CTC	Taxable Income Before Meal Break	Taxable After Meal Exemption	Approx. Tax Savings
Rs 7,00,000	Rs 594,400	Rs 519,400	Rs 17,035
Rs 13,00,000	Rs 1,194,400	Rs 1,119,400	Rs 87,953
Rs 15,00,000	Rs 1,394,400	Rs 1,319,400	Rs 119,153
Rs 20,00,000	Rs 1,894,400	Rs 1,819,400	Rs 180,253
Rs 25,00,000	Rs 2,394,400	Rs 2,319,400	Rs 208,853

Compared to the current annual exemption cap of Rs 26,400, this could mean:

Around Rs 79,200 in additional tax-exempt income
Nearly Rs 24,710 in tax savings for individuals in the 30 per cent tax bracket (including cess)

How The Perquisite Valuation Would Work?

Under the draft rules:

Meal vouchers or prepaid cards usable at food outlets may remain tax-free up to Rs 200 per meal

Free meals or non-alcoholic beverages provided during office hours may also qualify for exemption, subject to conditions

Importantly, the taxable value of this benefit would depend on the employer's total spending minus any employee contribution.

Will This Apply To Both Tax Regimes?

Old Tax Regime:

If approved, the higher meal exemption is likely to be available.

New Tax Regime:

Since many traditional exemptions are not allowed under the new system, it remains unclear whether this benefit will be included. Final clarity will depend on how the law is framed when implemented.

Why This Matters For Salaried Employees?

Consider an employer providing meals worth Rs 150 per working day:

Under current rules, Rs 100 could be taxable

Under the proposed rules, the full Rs 150 may become tax-free

Over time, this reduction in taxable income could translate into meaningful savings. If implemented, the proposal would make meal benefits a more powerful tax-saving component of salary structures for many working professionals.