A PIL is being filed to avoid tax evasion through Meal Coupons. Has anyone received Income Tax notice for audit of Sodexo coupons?
Following is the email send to IT Department and charges raised in PIL:
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Dear Sir/Madam,
This is with reference to Meal Allowance paid through salary to employees in India.
Meal allowance in salary is tax exempt component and therefore many companies give food coupon to employees. Ideally it is to be used for ready to eat food and for meal taken in office (or nearby office within working time).
However, the coupons are grossly misused to create parallel currency.
· The coupons are redeemed without signature of the beneficiary. Thus, the usage becomes untraceable. And some vendors rotate/exchange the coupons as parallel currency. Is this legal? If not, why IT Department is silent on this?
· How can grocery stores and malls accept such coupons if the allowance is for ready to eat Meal? Isn’t this illegal to claim tax benefit for shopping groceries?
· How can the coupons be redeemed in bulk? The exemption is for Rs 50 spent every day on meal.
Income tax department must issue notice to such food coupon vendors (Sodexo, Ticket Restaurants) to explicitly make these points clear to their customers. Also the redeemed coupons should be checked randomly to confirm signature at the back of the coupon. Companies should also be mandated to record the use of coupons since they claim income tax exemption for their employees on the basis of these coupons.
Millions of employees and their employers grossly misuse the benefit of Meal Allowance to avoid tax. IT Department is requested to act and stop this tax fraud.
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From India, Mumbai
1Following is the email send to IT Department and charges raised in PIL:
-----------------------------
Dear Sir/Madam,
This is with reference to Meal Allowance paid through salary to employees in India.
Meal allowance in salary is tax exempt component and therefore many companies give food coupon to employees. Ideally it is to be used for ready to eat food and for meal taken in office (or nearby office within working time).
However, the coupons are grossly misused to create parallel currency.
· The coupons are redeemed without signature of the beneficiary. Thus, the usage becomes untraceable. And some vendors rotate/exchange the coupons as parallel currency. Is this legal? If not, why IT Department is silent on this?
· How can grocery stores and malls accept such coupons if the allowance is for ready to eat Meal? Isn’t this illegal to claim tax benefit for shopping groceries?
· How can the coupons be redeemed in bulk? The exemption is for Rs 50 spent every day on meal.
Income tax department must issue notice to such food coupon vendors (Sodexo, Ticket Restaurants) to explicitly make these points clear to their customers. Also the redeemed coupons should be checked randomly to confirm signature at the back of the coupon. Companies should also be mandated to record the use of coupons since they claim income tax exemption for their employees on the basis of these coupons.
Millions of employees and their employers grossly misuse the benefit of Meal Allowance to avoid tax. IT Department is requested to act and stop this tax fraud.
------------------------------
From India, Mumbai
Hollowed PIL. I can use meal allowance to buy groceries to prepare meal at home. What is wrong? Allowances can be used for the family expenses. Pon
From India, Lucknow
From India, Lucknow
Hi PON,
That's exactly the objection taken in the email. The meal allowance is tax exempt since it is used for buying food when you attend office at rate of Rs 50 per meal.
So buying groceries is a violation of income tax. However, I think IT Department will hold Employer responsible for this since the employer gives the coupons in bulk to employees.
Another violation is Meal Allowance given for days when employee is on leave. If an employee is on leave, meal allowance should be made taxable for those days. But many companies do not follow this. So such employers are liable for action by IT department.
Regards,
Pranav
From India, Pune
That's exactly the objection taken in the email. The meal allowance is tax exempt since it is used for buying food when you attend office at rate of Rs 50 per meal.
So buying groceries is a violation of income tax. However, I think IT Department will hold Employer responsible for this since the employer gives the coupons in bulk to employees.
Another violation is Meal Allowance given for days when employee is on leave. If an employee is on leave, meal allowance should be made taxable for those days. But many companies do not follow this. So such employers are liable for action by IT department.
Regards,
Pranav
From India, Pune
Hi Pranav,
Do you think I.T.authorities are not aware of the usage of food coupons? After all, the food coupons are converted into food only.
If food coupons are taxable, what about gift vouchers upto 5000/- which are exempt from tax?
Why you should expect tax concession for conveyance allowance?
why you should expect tax concession for housing loan for the house built for you & family?
why you should expect tax exemption for Health club fees?
There are more tax saving components and the FM & IT dept must have taken all factors before deciding the tax applicability on various components of income.
Pon
From India, Lucknow
Do you think I.T.authorities are not aware of the usage of food coupons? After all, the food coupons are converted into food only.
If food coupons are taxable, what about gift vouchers upto 5000/- which are exempt from tax?
Why you should expect tax concession for conveyance allowance?
why you should expect tax concession for housing loan for the house built for you & family?
why you should expect tax exemption for Health club fees?
There are more tax saving components and the FM & IT dept must have taken all factors before deciding the tax applicability on various components of income.
Pon
From India, Lucknow
Hi Pon,
All other allowances like Conveyance, Home Load etc are used as per Income Tax guidelines. However, Sodexo is not used as per the guidelines and that is easily traceable.
E.g. Conveyance is Rs 800 per month and does not require any proof or precondition. LTA is offered as per guidelines (once in 2 years etc) and even if employee offer fake bills, employer will not be in trouble.
On contrary, Meal Allowance is payable only for days present in office at rate of Rs 50 per meal. The expectation may not seem reasonable, but that is what the law says. So companies can be in trouble if this is audited by IT Department.
I got an NC in internal audit since the auditors discovered that we didn't deduct Sodexo amount for employees who were on leave in a particular month.
Regards,
Laxmi
From India, Mumbai
All other allowances like Conveyance, Home Load etc are used as per Income Tax guidelines. However, Sodexo is not used as per the guidelines and that is easily traceable.
E.g. Conveyance is Rs 800 per month and does not require any proof or precondition. LTA is offered as per guidelines (once in 2 years etc) and even if employee offer fake bills, employer will not be in trouble.
On contrary, Meal Allowance is payable only for days present in office at rate of Rs 50 per meal. The expectation may not seem reasonable, but that is what the law says. So companies can be in trouble if this is audited by IT Department.
I got an NC in internal audit since the auditors discovered that we didn't deduct Sodexo amount for employees who were on leave in a particular month.
Regards,
Laxmi
From India, Mumbai
@Laxmi,
In case of LOP only, such deductions arise. Otherwise, no allowance is deductible and leaves are adjusted from the EARNED leaves. Sodexo coupons are fully authentic and permitted by I.T.Dept. How can they transact in such volume with out the approval of regulatory bodies. In many organisations, food coupons are part of CTC.
Pon
From India, Lucknow
In case of LOP only, such deductions arise. Otherwise, no allowance is deductible and leaves are adjusted from the EARNED leaves. Sodexo coupons are fully authentic and permitted by I.T.Dept. How can they transact in such volume with out the approval of regulatory bodies. In many organisations, food coupons are part of CTC.
Pon
From India, Lucknow
All allowances are paid as per salary payment. And they get prorated for LOP.
However, the text of Meal Allowance clearly says it's for days present in office. So even Earned Leaves do not qualify for tax exemption on meal allowance.
Conveyance is for a month/ LTA is for a year, so it does not matter if the person is absent for few days. However, Meal Allowance is daily allowance and therefore it is expected that Meal Allowance is not paid for leave days. Many companies have started following this by recording swipes and then multiplying it by Rs 50 a day for tax exempt meal allowance.
However, companies offering Sodexo/Ticket Coupons, do not deduct coupons for leaves. Ideally coupons value for leave days should become taxable.
From India, Mumbai
However, the text of Meal Allowance clearly says it's for days present in office. So even Earned Leaves do not qualify for tax exemption on meal allowance.
Conveyance is for a month/ LTA is for a year, so it does not matter if the person is absent for few days. However, Meal Allowance is daily allowance and therefore it is expected that Meal Allowance is not paid for leave days. Many companies have started following this by recording swipes and then multiplying it by Rs 50 a day for tax exempt meal allowance.
However, companies offering Sodexo/Ticket Coupons, do not deduct coupons for leaves. Ideally coupons value for leave days should become taxable.
From India, Mumbai
When I was working at NSEiT in Mumbai way back in 2004, they had a nice system to handle this. Begining of every month, they used to give us coupons corresponding to the number of working days in the month (50 per meal * 2 meals per day * no. of working days) and they used to subtract the number of leave taken in the last month from the same.
At that time I used to wonder, why they did such complex calculations when our friends in other companies used to get fixed amount. Later I realised that the Income Tax rules clearly specifies that the benefit is limited to the actual number of meals had by the employee at the workplace * Rs.50/- for each meal. No doubt NSEit being one of the consultants for the IT dept, wanted to keep their slate clean.
From India, Bangalore
At that time I used to wonder, why they did such complex calculations when our friends in other companies used to get fixed amount. Later I realised that the Income Tax rules clearly specifies that the benefit is limited to the actual number of meals had by the employee at the workplace * Rs.50/- for each meal. No doubt NSEit being one of the consultants for the IT dept, wanted to keep their slate clean.
From India, Bangalore
And by the way, this PIL is in the right direction because companies randomly give coupon booklets to their employees with scant respect to IT rules. I know some companies which give food coupons worth 3000. this is blantent misuse of the benefit.
From India, Bangalore
From India, Bangalore
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