The valuation of perquisite in respect of lunch/refreshment under the Income Tax Act is determined by Rule 3(7)(iii) of the Income Tax Rules, 1962.

The rule states that the value of free meals provided by the employer is taxable to the extent of the cost incurred by the employer, less any amount recovered from the employee.

However, there are two exceptions to this rule under Income Tax Act:

1. If the free meals are provided during working hours in a remote area or in an offshore installation, the value of the perquisite is exempt from tax.
2. If the free meals are provided through non-transferable paid vouchers usable only at eating joints, the value of the perquisite is also exempt from tax.

The taxable value of the perquisite is calculated under Income Tax Act:

For example, if an employer incurs a cost of Rs.100 per day for providing free meals to its employees, and the employees are required to contribute Rs.25 per day towards the cost of the meals, the taxable value of the perquisite is Rs.75 per day.

It is important to note that the valuation of perquisite in respect of lunch/refreshment is subject to change from time to time. It is advisable to consult a tax advisor for the latest updates on the valuation of this perquisite.

EXAMPLE

• Delhi: The value of free meals provided by the employer to the employee during working hours is taxable. The taxable value is determined by the expenditure incurred by the employer on providing the meals, less any amount paid by the employee.
• Maharashtra: The value of free meals provided by the employer to the employee during working hours is taxable. The taxable value is determined by the expenditure incurred by the employer on providing the meals, less any amount paid by the employee. However, there is an exemption for meals that are provided to employees who are working in remote areas or who are working in shifts.
• Tamil Nadu: The value of free meals provided by the employer to the employee during working hours is taxable. The taxable value is determined by the expenditure incurred by the employer on providing the meals, less any amount paid by the employee. However, there is an exemption for meals that are provided to employees who are working in remote areas or who are working in shifts.
• West Bengal: The value of free meals provided by the employer to the employee during working hours is taxable. The taxable value is determined by the expenditure incurred by the employer on providing the meals, less any amount paid by the employee. However, there is an exemption for meals that are provided to employees who are working in remote areas or who are working in shifts.
• FAQ QUESTION
• What is the valuation of perquisite in respect of lunch /refreshment under the Income Tax Act?
• The valuation of perquisite in respect of lunch /refreshment under the Income Tax Act is determined by the following:

The cost incurred by the employer for providing the lunch /refreshment.

The amount paid by the employee for the lunch /refreshment.

2. When is the value of perquisite in respect of lunch /refreshment taxable under Income Tax Act?

The value of perquisite in respect of lunch /refreshment is taxable if it is provided to the employee free of charge or at a concessional rate.

3. What are the exceptions to the taxation of the value of perquisite in respect of lunch /refreshment under Income Tax Act?

There are a few exceptions to the taxation of the value of perquisite in respect of lunch /refreshment under Income Tax Act, these include:

Lunch /refreshment that is provided during working hours in remote areas or in an offshore installation.

Tea, coffee or non-alcoholic beverages and snacks during working hours.

Lunch /refreshment that is provided through a paid voucher.

4. How the value of perquisite in respect of lunch /refreshment determined if it is provided during working hours in remote areas or in an offshore installation under Income Tax Act? 

5. How the value of perquisite in respect of lunch /refreshment determined if it is provided through a paid voucher under Income Tax Act?

The value of perquisite in respect of lunch /refreshment is determined by the face value of the voucher.