What is the story about?
New Income Tax Draft Rules: The draft Income-tax Rules, 2026 have proposed a major relief for salaried employees who receive subsidised meals through office
canteens or meal vouchers such as Sodexo (Pluxee) and Zaggle. Earlier, the Income Tax Act allowed a tax exemption of up to Rs 50 per meal. This meant that if an employer provided two meals a day worth Rs 50 each (total Rs 100), the amount was not taxed. Now, the draft rules propose increasing this limit to Rs 200 per meal. If approved by Parliament, employees could receive up to Rs 1,05,600 per year as tax-free meal benefits.
How Can Employees Get Rs 1,05,600 Tax-Free?
Shubham Jain, Director, SVAS Business Advisors, explained the calculation to ET Wealth Online.
Also Read: Old Or New Tax Regime? How Latest Rule Changes Could Shift High-Income Bracket Toward The Old Structure
If an employer provides two meals per working day:
- Rs 200 × 2 meals = 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
“So, a tax-free meal benefit of up to Rs 1,05,600 per year is allowed under the proposed rules,” Jain said.
How Much Extra Tax Can You Save?
Currently, under the old limit of Rs 50 per meal, the yearly exemption works out to Rs 26,400.
Under the proposed Rs 200 limit, the exemption increases to Rs 1,05,600.
The additional exemption would therefore be:
Rs 1,05,600 − Rs 26,400 = Rs 79,200 per year
Gaurav Jain, Partner, Direct Tax, Forvis Mazars in India, told the outlet that employees would save tax on this additional Rs 79,200.
If someone falls in the 30% tax slab, plus 4% cess (total 31.2%), the tax saving would be:
Rs 79,200 × 31.2% = approximately Rs 24,710.
Jain explained that savings would be lower for people in lower tax slabs.
How This Works for Different Salary Levels
Simply claiming the meal voucher exemption alone may not significantly increase tax savings under the old tax regime.
However, if combined with other deductions such as Section 80C and 80D, the overall tax savings can improve for employees earning Rs 7 lakh, Rs 13 lakh, Rs 15 lakh, Rs 20 lakh, or Rs 25 lakh.
When Will the Benefit Not Apply?
Gaurav Jain of Forvis Mazars in India said the benefit will not apply in the following cases:
- Free food and non-alcoholic beverages provided at the office during working hours, if the value does not exceed Rs 200 per meal
- Tea or snacks provided during working hours
- Free food and non-alcoholic beverages provided in remote areas or offshore installations
Old vs New Tax Regime: Is the Benefit Available?
According to Gaurav Jain of Forvis Mazars in India, under the old tax regime:
Meal vouchers are exempt up to Rs 200 per meal if the draft rules are approved.
However, for the new tax regime, the situation is not fully clear.
Under the Income Tax Act, 1961 and existing rules, the exemption does not apply if a taxpayer opts for the new regime under Section 115BAC.
The rule states: “Provided further that the provisions of the first proviso in respect of free food and nonalcoholic beverage provided by the employer through paid voucher shall not apply to an employee, being an assessee, who has exercised an option under sub-section (5) of Section 115BAC or whose income is chargeable to tax under sub-Section (1A) of Section 115BAC.”
This means that under the current law, meal vouchers are taxable if a person chooses the new tax regime.
However, under the draft Income Tax Act, 2025 and draft rules, there is no specific provision denying this benefit to those opting for the new regime. The final decision will depend on how the government amends the law and issues notifications after Parliament approval.
In summary, if the proposal is passed, salaried employees under the old tax regime could see a sharp jump in tax-free meal benefits, up to Rs 1.05 lakh annually, with potential tax savings of around Rs 24,700 for those in the highest tax slab.
