Relevant Income-Tax provisions

Quick Summary:

Sr No Name of Section in IT Extent to which Total Exemption Limit

Allowance Act allowance is exempt
1 Meal Allowance 17 (2) Food in office premises or INR 3,250 pm – Make the proposal
(viii) read through non-transferable plantwise
with Rule 3(7) paid vouchers usable only
(iii) at eating joints provided
by an employer is not
taxable, if cost to the
employer is Rs. 50(or less)
per meal.
2 Gift Cards/Voucher 17(2)(viii) read Gift in kind up to Rs.5,000 INR 5,000 pa
with Rule 3(7) in aggregate per annum
(iv) would be exempt, beyond
which it would be taxable
3 Running and Rs. 1,800 pm (Engine Rs. 1,800 pm (Engine Capacity
Maintenance Capacity upto 1600 cc) upto 1600 cc)
Expenses (Car – Rs. 2,400 pm (Engine Rs. 2,400 pm (Engine Capacity
Owned by Capacity above 1600 cc) above 1600 cc)
17(2)(viii)
Employee)
read with Rule
4 Running and Fully exempt subject to We could look at gradewise
3(2)
Maintenance maintenance of specified entitlements:
Expenses (Car – documents Mgr to DGM – INR 15,000 pm
Owned by GM to AVP – INR 30,000 pm
Employer) VP & Above – INR 35,000 pm
5 Telephone/Internet Rule 3(7)(ix) there is no prescribed We could look at gradewise
Allowance limit on the amount of entitlements:
reimbursement the Levels Amount
employer can provide. Level 1 (JM/AM/DM)
INR 750 pm
However, it must be Level 2 (Mgr/Sr. Mgr)
reasonable and as per the Level 3 (AGM/DGM)
INR 1,200
employee’s pay grade. Level 4 (GM/Sr.
pm
GM/AVP)
Level 5 (VP/SVP/EVP)
INR 2,000
Level 6 (President)
 Detailed Inputs
Meal Cards:

The following exceptions2 have been provided in this regard:

 Free food and non-alcoholic beverages provided by such employer during working hours
at office or business premises or
 Tea or snacks provided during working hours; OR
 Free food and non-alcoholic beverages provided during working hours in a remote area
or an off-shore installation.
The value of free food and non-alcoholic beverages provided by the employer to an employee is
taxable in the hands of the employee as a perquisite. The perquisite value is calculated as the
amount of expenditure incurred by such employer in this regard as reduced by the amount if any
paid/ recovered from the employee.
Accordingly, if free food and non-alcoholic beverages are provided by employer to employee,
through paid vouchers which are not transferable and usable only at eating joints, to the extent
the value is Rs.50 or less per meal, the benefit is not taxable in the hands of the employee as
perquisite.

Gifts:

The value of any gift, or voucher received by the employee or by member of his household on
ceremonial or other occasions from the employer, shall be considered as tax free perquisite4 in
the hands of the employee provided the value of the same is below INR 5,000 in aggregate pa.
Also, awards / long term service award or gift paid in cash (exceeding INR 5,000 pa) is fully
taxable in the hands of the employee.

Car owned by the employee:

In a case where the car is owned by the employee and running and maintenance expenses are
met or reimbursed by the employer (per month maximum amount):
Cubic Capacity Cubic Capacity
Description exceeding 1.6
within 1.6 litre litre
Running and Maintenance Expenses INR.1,800 INR.2,400
Driver Expenses INR.900 INR.900

Car owned by the employer

Irrespective of who owns the car, if the car provided by the employer is used solely for official
purposes, no tax liability exists. For this to be non-taxable, the employer must maintain proper
records as given below:
  Details of all the official journey must be maintained including details such as date,
destination, mileage, bills, and other expenditures related to it.
 The employer must also issue a certificate stating that the vehicle was used only for
official purposes.
Telephone and Internet Allowance:

As per Rule 3(7)(ix) of the Income Tax Act, all telephone/internet reimbursements which
employees get for conducting their official duties are not taxable. Thus, individuals can claim a
100% tax exemption on the billed amount.
These reimbursements include the following:

 Landline bills
 Mobile phone bills
 Mobile internet bills
 Home Wi-Fi connection bills
According to government rules, there is no prescribed limit on the amount of reimbursement the
employer can provide. However, it must be reasonable and as per the employee’s pay grade.
Thus, regardless of their tax regime, people can avail telephone and internet allowance
exemptions to reduce their taxable income.

Children Education and Hostel Expenditure Allowance:

An allowance of up to INR 100 per month, per child, is tax-free under Section 10. Also, there is a
hostel allowance for expenses that are made towards a child’s hostel fee, up to INR 300 per
month per child. This exemption can be availed for two children only.

Leave Travel Allowance (LTA):

Section 10 (5), or leave travel allowance exemption, is applicable for individual taxpayers. The
LTA exemption applies only to the domestic travel expenses, such as airfare, train or bus fare,
incurred by the employee. Other expenses, such as transportation within the destination,
sightseeing, hotels, and food, are not covered.