KPMG - Report

KPMG Assurance and Consulting Services LLP Telephone: +91 40 6111 6000
Salarpuria Knowledge City Fax: +91 40 6111 6799

Orwell, A Wing, 6th Floor, Unit - 3 Web: www.kpmg.com/in
Sy No. 83/1, Plot No. 2, Raidurg Email: indiawebsite@kpmg.com
Hyderabad - 500 081, India.
Mr. Shashank Karhade

Zaggle Prepaid Ocean Services Private Limited,
Plot no. 8, 3rd Floor, CSR Estate, Sector 1, Main Rd,
HUDA Techno Enclave, Madhapur,
Hyderabad- 500081, India
Date: 17th December 2020
Dear Shashank,
As requested by you, please find enclosed the advice covering our responses from Indian income-
tax perspective to your specific queries in relation to the Zinger electronic card.
This advice is as per the scope agreed vide our engagement letter dated 29th July 2019 read along
with our mutually agreed terms of business.
Please acknowledge the receipt of the same.
Do let us know in case you require any information/ clarification in this matter.
Thanking you,
Yours faithfully,
For KPMG Assurance and Consulting Services LLP,
Parizad Sirwalla
Partner
Encl: As above
KPMG Assurance and Consulting Services LLP, an Indian limited KPMG (Registered) (a partnership firm with Registration No. BA- Registered Office: Lodha
liability partnership and a member firm of KPMG global organization 62445) converted into KPMG Assurance and Consulting Services Excelus, 1st Floor Apollo Mills
of independent member firms affiliated with KPMG International LLP (a Limited Liability Partnership with LLP Registration No. AAT- Compound,N. M. Joshi Marg,
Limited, a private English company limited by guarantee 0367), with effect from July 23, 2020 Mahalaxmi, Mumbai - 400 011
ZAGGLE PREPAID OCEAN SERVICES
PRIVATE LIMITED
Tax implications on various payments through Zinger Card
23 pages
Dec 2020
Zaggle Prepaid Ocean Services Private Limited
Advisory on tax and regulatory services
Dec 2020
Index
S.no. Particulars Page no.
1. Background 3
2. Scope of services 4
3. Overview of existing policy 6
Relevant Income-tax provisions

4.1 Tax implications in the hands of employee
4.1.1 Meal 8
4.1.2 Gift 9
4.1.3 Business Travel expense 9

4.
4.1.4 Leave Travel Allowance (‘LTA’) 10
4.1.5 Fuel expense 11
4.1.6 Driver salary 12
4.2 Withholding tax obligation of employer 13
5. Response to specific queries 17
6. Disclaimer 22
© 2020 KPMG Assurance and Consulting Services LLP, an Indian Limited Liability Partnership and a member firm of the KPMG global organizations
of Independent member firms affiliated with KPMG International Limited, a private English company limited by guarantee. All rights reserved.
2
Dec 2020
1 Background
• Zaggle Prepaid Ocean Services Private Limited (hereafter referred to as ‘Zaggle’ or
‘Company’) is a company incorporated in India and is engaged in development of proprietary
technology that facilitates financial transactions through various delivery mechanisms such
as Stored Value Cards (both Closed-Loop and Semi-Closed Loop as defined by RBI), e-
Vouchers, Mobile Wallet, QR Codes, Barcodes and e-Commerce Payment Gateway.
• Company has introduced a multiwallet digital card called Zinger in partnership with several
banks (hereafter referred to as ‘Zinger’card”), sponsoring the BIN and VISA /
MASTERCARD that provide transaction settlement services, to be used by corporates for
their employees to extend benefits such as Meals, Annual Gifts, Mobile Phone Bill, etc., or
to meet business related expenses such as Fuel, Travel (train, bus, air, taxis, etc.,),
Entertainment, etc., by loading the various wallets on the card with a Rupee value as per the
company policy
• In this regard, Zaggle has approached KPMG Assurance and Consulting Services LLP (“the
Firm” or “We”) to provide comments and responses to specific queries shared from India
Income-tax perspective only, basis the provisions of the Income-tax Act, 1961 (‘the Act’) and
the Income-tax Rules, 1962 along with applicable judicial and administrative interpretations
thereof, in light of the aforesaid background.
3
Dec 2020
2 Scope of Services
We have been approached to render the following services to the Company:
2.1. Providing our comments and responses to queries shared with us vide email dated 24th June
2019 (listed in Note 1), from India Income-tax perspective only, basis the provisions of the
Income-tax Act, 1961 (‘the Act’) and the Income-tax Rules, 1962 along with applicable
judicial and administrative interpretations thereof.
2.2. Providing need based advice on any other routine tax and regulatory queries in this regard,
from the perspective of the Act.
Scope Limitations for para 2:

Our services shall be limited to tax advisory in nature and we will not participate in or make
decisions regarding the compensation policies of the Company. Further, please note that our
above scope of work would exclude the following:
• Legal services;
• Valuations or financing or transaction advisory/assistance;
• Payroll Processing or Signing any forms or returns;
• Cash handlings;
• Accounting and bookkeeping services;
• Commenting on any equity based compensation methods or the tax implications thereof;
• Commenting on the general industry trends on the compensation;
• Commenting on Goods and Services tax implications;
• Commenting on Corporate taxation and Transfer pricing implications, if any;
• Implementation support, if any;
• Comments from a social security (provident fund) and/or labour law perspective;
• Benchmarking the compensation amounts and structure against the composition followed
by the other companies / industries.
• Drafting of HR policy and any compensation policies;
• Signing any forms or return for and on behalf of the client; and
• Commenting on any other law/regulations not specifically mentioned in the scope of
services.
Management Responsibility: With respect to our scope of work in paragraph 2 above, the
management of the Company acknowledges and accepts full responsibility for all decisions
taken by them in regard to any advices/comments provided by us. Our Scope will only be limited
to tax and regulatory advisory with regard to the same. We will not, pursuant to this letter, perform
any management functions for the Company nor make any decisions relating to the services
provided by us in terms of this letter. The Company is responsible for making management
decisions, including accepting responsibility for the results of our services. Additionally,
management is responsible for evaluating the adequacy of the services provided, evaluating any
findings or recommendations and monitoring ongoing activities.
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Dec 2020
Note 1:
1. Does the usage of Meal wallet in Zinger Meal Card for purchase of food & non-alcoholic
beverages at company canteen / cafeteria / food court, large and small format food stores,
restaurants, café’s, pizzerias, bakeries, sweet shops, juice shops, ice cream parlors and food
delivery apps like Zomato and Swiggy, qualify for income tax exemption towards free /
subsidized meals provided by the employer to the employee, up to Rs.50 per meal as per
Rule 3(7)(iii) of the Income Tax Rules?
2. Many companies provide 2 meals @ Rs.50 per meal and 2 snacks @ Rs.25 per snack
amounting to Rs.150 per day. Is this allowed? How can an organization frame a policy to
accommodate the same?
3. Can the employee spend the entire value stored on the Meal wallet at one go?
4. Is it sufficient if the employee submits a statement of the digital transactions or take an

image of the bill for uploading on to the Zaggle expense management platform to validate
the expense?
5. How can organizations use travel Wallet to give LTA advance? What are the compliance
measures that the employee needs to undertake to avail tax exemption? Also in what manner
this amount should be paid to an employee through wallet?
6. Does the Gift wallet loading of Rs.5,000 in a financial year qualify for income tax
exemption under the present I-T Rules?
7. In some cases where companies give a monthly Fuel allowance to the employee to meet
fuel expenses incurred by the employee for business purposes, as per the grade / level of
the employee, what should be the treatment for the unused value at the end of the fiscal
year?
8. In case company wants to pay driver salary through the card (through expenses wallet,
which allows money to be withdrawn) – how the process of payment should work and what
kind of documentation is needed.
5
Dec 2020
3 Overview of existing policy

• Below are the key features of the card:
¾ This card shall be used by Corporate Companies and issued to their employees.
¾ The card is KYC compliant product with a restriction to a maximum load of INR 1,00,000
at any given point as per RBI Guidelines
¾ Each card contain multiple wallets for specific purpose like meal, gift, fuel, travel,
expense etc.,
¾ The card is programmed in such a manner that funds stored in each wallet such as Meal,
Gift, Fuel, Mobile, Expenses etc., can be utilized or used at a specific set of merchant
categories as identified by their unique merchant identification number and terminal
identification number based on the contractual arrangement entered with the Electronic
Data Capture (EDC) machine provider on behalf of Visa / MasterCard.
¾ No employee shall be able to load any money in any of the wallet by himself/herself;
¾ The money in one wallet cannot be transferred to other wallet;
¾ Card is non-transferrable and the unspent balance remaining in the respective wallets at
the year is non-refundable and shall be carried forward to next year, except for balance
in expense wallet, as per discretion of employer.
• Broad description of various wallets made available under the card is given as below:
S.no. Type of Description
wallet
1 Meal Wallet Employers can load this wallet on the Zinger card to:
• Extend a tax-free Meal benefit of up to Rs.50 per meal as per
prescribed rules of income-tax to their employees
• Give Daily Food Allowances to employees who are travelling to
places other than their base location for business purposes.
• Late sitting allowance in case some employees work late hours.
• Load the cards of Team Managers, Department Heads or Business
Heads to facilitate payments for team celebrations or client
entertainment.
The Meal wallet is accepted across 100,000+ food & non-

alcoholic beverage merchants affiliated to VISA / MASTERCARD,
which include large and small format F&B stores, restaurants, café’s,
company canteen / cafeteria / food court, pizzerias, bakeries, sweet
shops, juice shops, ice cream parlors and food delivery apps like Zomato
and Swiggy.
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Dec 2020
2 Gift Wallet Employers can use this wallet:

• To extend a gift of INR 5,000 per annum given on special occasions
like Diwali as allowed under I-T Rules.
• To give a gift on Employee Birthdays, Reward & Recognition
Programs such as Employee Referral, Employee of the Month, Long
Service, etc.
The Gift Wallet can be used across all merchant categories that accept
card payments.
3 Travel • Companies can extend a travel / tour advance to employees who

Expense frequently travel across India for business related expenses.
Wallet • The Travel wallet on the card can be used to purchase bus, train, air
tickets; pay for hotel accommodation, food expenses or taxis. This
wallet can be used in lieu of advances / reimbursements provided to
the employees for business purposes.
• Companies can also load the leave travel advance eligibility on the
Travel Wallet allowing the employee to spend for his/her travel with
the immediate family while on official leave / vacation.
4 Fuel Wallet • Companies can load a value at the beginning of the month and
thereafter reload the card at periodic intervals.
• This wallet is usable to pay for fuel expenses incurred on account of
business related travel and is accepted only at all fuel stations that
have an EDC machine.
5 Expense • A specific expense cannot be attributed in this wallet. Companies can

Wallet load money per any specific business requirement. Cash withdrawal
up to INR 10,000 per day shall be allowed.
• This is not a restrictive wallet with limits/type of payment and can be
used across various categories such as eating/ticketing/cash
withdrawal etc.
• Employee has to take a picture of the bill towards the expense
incurred out of funds in this wallet and then upload the same for
approval using a mobile interface, which can be viewed/approved by
the reporting manager using the same web or mobile interface.
• Any unspent amount at the year-end can be refunded back to the
employer, as per discretion of employer, unlike other wallets wherein
such unspent amount is carried forward and is not refundable back to
employer.
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Dec 2020
4 Relevant Income-Tax provisions

4.1 Tax implications in the hands of employee:
4.1.1 Meal card
x 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 employee1;
x 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
Through paid vouchers which are not transferable and usable only at eating joints,
to the extent the value thereof in either case does not exceed Rs.50 per meal; 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.
x 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.
x The term “Voucher” is not defined under the Act or the Rules. Further, the Rules do not
specify whether the voucher should be in a “paper” or “digital/ electronic” format. Also, it is
not defined under the General Clauses Act. However basis the interpretation from various
dictionaries, it appears that the term “voucher” refers to an instrument representing receipt for
/ evidence of payment of money.
x Subsequent to the abolition of FBT with effect from FY 2009-10, the perquisite value for
meals provided by employer only carves out an exception for paid vouchers. Electronic pre-
paid meal cards have not been expressly referred to in the Rule.
x In substance, the electronic/ digital voucher intends to be an administrative improvement over

paper vouchers and is a digital representation of it.
1
Rule 3(7)(iii) of the Rules
2
Proviso to Rule 3(7)(iii) of the Rules
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Dec 2020
x Moreover, as per the direction3 by the Reserve Bank of India (‘RBI’), prepaid meal
instruments should be issued in electronic form and should be reloadable. Cash withdrawal or
fund transfer would not be permitted on such instruments.
x We understand that meal wallet issued by Zaggle in Zinger card can be held and carried in a
computing device with storage and a screen. The Zinger meal wallet will contain digital
vouchers with an issue date and will represent certain money value which can be expended at
eating joints. Each voucher will have a separately identifiable number.
4.1.2 Gift
x 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
per annum.
x However, such gifts cannot be contractual in nature (i.e., dependent on rendering of intended
services) or based on performance.
x Also, awards / long term service award or gift paid in cash is fully taxable in the hands of the
employee.
4.1.3 Business travel expenses

• The taxability of allowances extended for the purpose of travel/tour for business travelling
employees is governed by prescribed provisions5 of Act and Rules along with various
available judicial precedents. In this regard, the following allowances shall qualify for
exemption:
a) Any allowance granted to meet the cost of travel on tour or on transfer; and
b) Any allowance, whether granted on tour or for the period of journey in connection with
transfer, to meet the ordinary daily charges incurred by an employee on account of
absence from his normal place of duty.
• Taxability of per-diem allowance while being on ‘tour’ has been a vexed issue, specifically
for the reason that the exemption under Section 10(14)(i) of the Act is granted only to the
extent of expenses actually incurred for the said purpose.
3
Master Direction on Issuance and Operation of Prepaid Payment Instruments dated 16 th October 2017 (updated as on 29th Dec
2017)
4
Rule 3(7)(iv) and proviso to Rule 3(7)(iv) of the Rules
5
Section 2(24)(iiia), Section 10(14)(i) of the Act read with Rule 2BB(1)(a), (b) and (c) of Rules
9
Dec 2020
• There have been conflicting judicial rulings6 on the requirement for an employer to verify
that the per-diem allowance paid to the employees while working away from their normal
place of duty were actually spent by them. In other words whether an employer is required to
obtain actual expenditure proof incurred by the employee to verify the claim as against a self-
declaration by the employee (for amounts spent) supported by the fact that the per-diem meets
the test of “reasonableness” is a debatable issue, especially in absence of any specific
guidelines prescribed either under the Act or Rules regarding the format/ manner in which
the evidences/self- declarations for expenses incurred, that may be collected by the
employers.
• As a pragmatic approach, in case where original bills are not available then one may ask the
employees to submit electronic copies of the same along with a self-declaration providing
complete particulars of the expenditure incurred.
• Further, in case of petty expenses for which it may not be possible to obtain bills/ receipts
(e.g. conveyance, eateries etc.,), a signed declaration from the employee can be obtained
stating that the specified amounts have been actually incurred in discharge of official purpose
along with the date wise breakdown of nature of expenses incurred, however in such cases
reasonableness of such expenses incurred by employer vis-à-vis the allowance being paid is
an important factor to be established. In the absence of the same, it is a possibility that the
Indian tax authorities may construe that an increase in salary is being passed on to the
employees and thus the exemption may not be available.
4.1.4 LTA
x LTA is exempt in respect of two journeys in a block of four calendar years. The block of
calendar years currently applicable is 2018 to 2021;
x If an employee has not availed an exemption of LTA during any of the specified four-year
block periods on one of the two permitted occasions, or on both occasions, then the exemption
can be claimed in the calendar year immediately following that block. This is popularly known
as the ‘carry-over’ concession. In such cases, the exemption so availed will not be counted
for purposes of regulating the two exemptions allowable for the succeeding block of four
years;
x The exemption7 is restricted to the actual amount of expenditure incurred which in turn
is strictly limited to expenses on air fare, rail fare and bus fare only for the purpose of
such travel and is only available for journeys performed within India;
6
Sun Outsourcing Solutions Pvt. Ltd vs CIT [2018] 92 Taxman.com 339 (Hyderabad High Court); CIT vs. S.G. Pgnatale 1980-
(IT2)-GJX -0147 -GUJ (Gujarat High Court); CIT v. Symphony Marketing Solutions India Pvt. Ltd TS-5207-HC-2016 (Karnataka
High Court)
7
Rule 2B of Income-tax Rules, 1962
10
Dec 2020
x Employee should be on a leave (viz. annual leave, privilege leave, casual leave, etc.) during
the period for which LTA has been claimed. Which specific type of leave to be applied in this
regard has not been defined under the Act;
x Where the journey is performed in a circuitous route, the exemption is limited to what is
admissible by the shortest route. Likewise, where the journey is performed in a circular form
touching different places, the exemption is limited to what is admissible for the journey from
the place of origin to the farthest point reached in India, by the shortest route;
x The exemption shall be available either if the employee is travelling alone or accompanying
his family8. However, exemption shall not be available if the family members are travelling
separately without the employee who is not on leave;
x The exemption will not be available to more than 2 surviving children of an individual born
after 1-10 1998, except in case of multiple births after one child;
x Before providing any exemption towards LTA, the employer should satisfy himself about the
adherence to the conditions prescribed for such exemption and also keep and preserve
evidence in support thereof;
x While no specific documentation and limit has been prescribed in law, the employer may
ensure the following before allowing LTA exemption. :
- In case of air travel, original ticket (including e-ticket) and boarding pass;
- In case of train travel, the train ticket (including e-ticket) in original;
- In case of bus travel or other mode of transport, the original ticket / receipt;
- In case of travel by own transport, fuel bills will be required. However, exemption cannot
exceed either bus or train fare as applicable;
- In case of e-tickets (either air/ bus/ rail), it should be certified to be true by the employee.
- In case of new recruits, the Company should also obtain a declaration with respect to the
LTA exemption claimed by them, with their previous employer, during the current
calendar year block.
4.1.5 Fuel expense

x As per the provisions9 of the Act read with Rules, where the company provides fuel expenses
towards wholly official/business related travel, such payment is not taxable in the hands of
the employee.
8
For the purposes of Leave travel allowance, "family", in relation to an individual, means- (i) the spouse and children of the
individual; and (ii) the parents, brothers and sisters of the individual or any of them, wholly or mainly dependent on the individual.
9
Section 2(24)(iiia), Section 10(14)(i) of the Act read with Rule 2BB(1)(a), (b) and (c) of Rules
11
Dec 2020
x The Act or Rules does not prescribe any limits for such payment and company needs to be
prudent while deciding the limits.
x While there are no guidelines for the requisite documentation to be collected by the employer
in this regard, however inference can be drawn from other provisions of the Act, which can
include original fuel bills, declaration from employee on monthly/quarterly basis covering the
purpose of travel for which expense has been incurred etc.,
x In case, the employee is availing the transport facility provided by the employer, then he/she
would not be eligible to avail this benefit.
4.1.6 Driver salary

x The payment of driver salary by the employer on company owned car used partly for official
purpose and partly for private is considered as a taxable perquisite in the hands of the eligible
employee to the extent of INR 900 per month as per the Rules10.
x If payment to driver is made for the company/employee owned car used wholly for official
purpose, then the entire amount paid as salary to driver is exempt in the hands of the employee.
However, where the employee owned car is used partly for official and partly for personal
purpose, then any amount provided by employer less INR 900 per month is subject to taxation
in the hands of the employee.
x Tax exemption of the driver salary should be made strictly upon verification of original
payment voucher (either manually or through digital mode) towards such salary in prescribed
format.
10
Rule 3(2)(A) of the Income-tax Rules
12
Dec 2020
4.2 Withholding obligation in the hands of employer:

The extracts of relevant provisions of the Act are provided as below:
Section 192 of the Act-
(1) “Any person responsible for paying any income chargeable under the head "Salaries"
shall, at the time of payment, deduct income-tax on the amount payable at the average rate of
income-tax computed on the basis of the rates in force for the financial year in which the payment
is made, on the estimated income of the assessee under this head for that financial year”
(2D) - “The person responsible for making the payment referred to in sub-section (1) shall, for
the purposes of estimating income of the assessee or computing tax deductible under sub-section
(1), obtain from the assessee the evidence or proof or particulars of prescribed claims (including
claim for set-off of loss) under the provisions of the Act in such form and manner as may be
prescribed."
Basis the above provisions, an interpretation can be drawn that every employer making any
payment chargeable under the head salary to its employees is required to deduct tax at source u/s
192 of the Act. In case of any default, employer may be considered as assesse in default and may
become liable to interest u/s 201(1A) and penalty u/s 221 of the Act.
However, in case any such payment is not offered to tax in the hands of the employee, the
employer needs to rely on specific exemption section/rule of the Act/Rules and obtain relevant
proofs/evidences from the employee proving that such payment was towards specific purpose and
manner specified, for which tax exemption is available under the provisions of the Act read along
with rules. However, no form or manner of obtaining evidence has been prescribed under the Act
or the Rules.
Reference is drawn from the Circular 20/2015, wherein it is mentioned that furnishing the
necessary proof etc., therewith to the satisfaction of the employer would suffice, to not withhold
tax on such payment. As per para 8 of the Circular 20/2015,
“The drawing and disbursing officers should satisfy themselves about the actual …payments
made by the employees, by calling for such particulars/ information as they deem necessary
before allowing the aforesaid deductions. In case the DDO is not satisfied about the genuineness
of the employee’s claim regarding any payment made by the employer, he should not allow the
same, and the employee would be free to claim the deduction/ rebate on such amount by filing his
return of income and furnishing the necessary proof etc., therewith to the satisfaction of the
Assessing officer.”
We would however like to mention that as per few judicial precedents11, employer was not held
in default on salary TDS, where no tax was deducted on fixed monthly sum paid towards medical
11
Infosys BPO [TS-372-ITAT-2013(Bang)] ACIT v. Thomson Corporation (International) (P.) Ltd [2013] 37 taxman.com 383
(Bangalore Tribunal); ACIT v. SAP Labs India (P.) Ltd [2013] 36 taxman.com 200 (Bangalore Tribunal); ITO v. Tata Elxsi
13
Dec 2020
expense and leave travel concession paid to employee, as employer eventually allowed exemption
against submission of proof of actual expenses incurred and where bonafide estimate of taxable
salary was made. However, such a position may be subject to litigation.
Basis the above analysis, our high level comments on obligation of the employer to deduct tax u/s
192 of the Act in respect of pre-loading of the money in to specified wallets is discussed as under:
Type of Our comments For further
S.no. wallet details refer
para
1 Meal Pre-loading of funds into meal wallet to the extent it doesn’t 4.1.1
Wallet exceed INR 50 per meal is tax exempt in the hands of the
employee and withholding obligation u/s 192 of the Act shall
not arise at the time of pre-loading into the wallet.
2 Gift Pre-loading of gift wallet shall be exempt in the hands of the 4.1.2
Wallet employee provided the value loaded is less than INR 5,000
(i.e., up to INR 4,999) in aggregate per annum on a ceremonial
or other occasions and no withholding obligations shall arise
u/s 192 of the Act by the employer; otherwise the entire
amount loaded will be taxable and non-deduction of tax by
employer would attract implications u/s 201 of the Act.
Any unspent amount in the wallet, at the yearend should be

taxable in the hands of the employee on which necessary taxes
are required to be withheld by the employer u/s 192 of the Act.
3 Travel We understand that this wallet accommodates both business 4.1.3 and
related as well as personal travel expenses (i.e., LTA). 4.1.4
Expense
Wallet
Business related expenses:
Pre-loading of any amount into the wallet, to cover cost of
travel on tour in connection with official purpose while being
away from normal place of duty, shall qualify for tax
exemption, provided original bills or electronic copies of
actual expenditure incurred along with self-declaration is
submitted by the employee.
Ltd. [2013] 37 taxman.com 275 (Bangalore Tribunal); ACIT v. Cisco Systems Asia Services [2013] 38 taxmann.com 381
(Bangalore Tribunal); Madhya Gujarat Vij Co. Ltd v. ITO [2011] 14 taxman.com 156 (Ahmedabad Tribunal) – rendered in relation
to over-time payments.
14
Dec 2020
LTA:
Similarly, value of any travel assistance provided by means of
loading of money into travel wallet by employer, in connection
with employee or his family proceeding on leave to any place
in India shall be treated as exempt in the hands of the
employee, subject to other conditions prescribed.
Hence, no withholding obligations shall arise u/s 192 of the

Act by the employer, provided all requisite conditions
specified under the Act read with rules are met by employee
and employer satisfy himself about its adherence by collecting
the evidence towards such expenditure incurred on such travel.

4 Fuel Pre-loading of fuel wallet shall be exempt in the hands of the 4.1.5
Wallet employee and no withholding obligations shall arise u/s 192 of
the Act by the employer provided employer satisfy himself
about its adherence by collecting the evidence along with self-
declaration towards such expenditure incurred for official
purpose.

5 Expense It is our understanding that for all miscellaneous -

wallet official/business related expenses, money shall be loaded in
this wallet and employer shall verify/approve the money spent
by the employee basis the supporting submitted towards such
expense. Also, any unspent money shall be refundable back to
the employer at the year end.
Basis the above, pre-loading of money into this wallet shall be

exempt in the hands of the employee and no withholding
obligations shall arise u/s 192 of the Act by the employer
provided employer satisfy himself about its adherence by
collecting the evidence along with self-declaration towards
such expenditure incurred for official purpose.
15
Dec 2020

Implications arising u/s 201 (1) and (1A) of the Act would
require separate analysis, once taxability is established.
It is important to note that the actual withholding tax implications u/s 192 of the Act should be
examined in detail for each employer separately, basis actual facts and circumstances of each
case.
16
Dec 2020
5 Response to specific queries

5.1 Does the usage of Meal wallet in Zinger Meal Card for purchase of food & non-alcoholic
beverages at company canteen / cafeteria / food court, large and small format food stores,
restaurants, café’s, pizzerias, bakeries, sweet shops, juice shops, ice cream parlors and food
delivery apps like Zomato and Swiggy, qualify for income tax exemption towards free /
subsidized meals provided by the employer to the employee, up to Rs.50 per meal as per Rule
3(7)(iii) of the Income Tax Rules?
As detailed in para 4.1.1 above, rules do not distinguish between a “paper” and “digital/
electronic” voucher, hence Zinger meal wallet can be considered as “”Vouchers” referred to in
the Rules for income-tax exemption purpose in the hands of employees, provided the same is:
- non-transferable
- provided for a value not more than INR 50 per meal; and
- usable only at eating outlets.
However, in case there is any deviation in the usage of the digitally held voucher i.e. for any
purpose other than food or non-alcoholic beverages or exceeding the limit of INR 50 per meal,
then the benefit over and above INR 50 per meal less any value recovered from the employee,
should be taxable in the hands of the employee. In such event, the employer could be held
responsible to withhold appropriate taxes under Section 192 of the Act and deposit the same with
the income tax authorities.
Based on various judicial precedents12, reasonable steps taken by Zaggle restricting the usage of
the vouchers to purchase of food at office canteen / cafeteria /food court, large and small format
food stores, restaurants, café’s, pizzerias, bakeries, sweet shops, juice shops, ice cream parlors,
food delivery aggregator platforms, etc. should suffice for the employer to claim that no tax is
required to be withheld on the provision of this benefit up to the specified limit.
Also, it may be contended that the employer is not obligated to monitor the end usage of the
card/expenses (say at departmental stores) incurred by the employees and cannot be penalized for
failure to deduct tax at source on account of any misuse if he has exercised caution and ensured
that the card is not transferrable.
It is important to note that in case free food and non-alcoholic beverages (including subsidized
food) is provided by employer during working hours at office or business premises and the same
is availed by the employee, then the tax exemption towards such meal cannot be claimed in respect
of meal wallet. In other words, free meals and meal card together should not be provided to an
12
CIT vs. Reliance Industries Ltd (2008) 175 Taxmann 367 (Gujarat High Court); ITO vs. Cadila Healthcare Ltd. (ITA nos. 3239
and 3240/Ahd/2009; ITO vs. Goodrich Aerospace Services (P) Ltd. (2013) 38 Taxmann 37 (Bangalore Tribunal); M/S Oracle
India Pvt. Ltd.,, ... vs Department Of Income Tax on 25 July, 2013 – (Bangalore Tribunal)
17
Dec 2020
employee and if given the benefit towards meal card shall be treated as taxable in the hands of the
employee.
Further, nowhere in the Act or Rules, ‘eating joint’ has been defined, hence a literal meaning that
can be understood/applied would be, a small or casual eatery where food items are made available.
Any food ordering and delivery company which has a tie up with a food supplier can also be
considered as an eating joint, as the ultimate expenditure incurred through this channel is being
used for purchase of food.
5.2 Many companies provide 2 meals @ Rs.50 per meal and 2 snacks @ Rs.25 per snack amounting
to Rs.150 per day. Is this allowed? How can an organization frame a policy to accommodate
the same
It is pertinent to note that while the number of meals has not been specified in the Act or Rules,
as per generic understanding, an employee would have one meal per day during working hours.
The relevant Rule uses the term ‘working hours’ and not ‘normal working hours’. Thus, the total
hours which an employee is working at the office in the course of his employment may be
considered as his working hours.
In some cases such as, distant location/ specific working hours/ long working hours/ double shifts/
overtime, may require the employee to have two meals per day during working hours (depending
upon the nature of the business of the employer). In such instances, it may be argued that
expenditure to the extent of more than one meal per day should not be considered taxable in the
hands of the employee, subject to meeting the other prescribed conditions.
Tea and Snacks:

As per the provisions of the Act read with rules, free tea or snacks provided by employer during
working hours to its employees are exempt from tax in the hands of the employee. Hence on a
plain reading of the said provisions, it appears that the vouchers ought to be used only for food
and non-alcoholic beverages (with a limit of INR 50 per meal) and not towards tea and snacks,
which is separately allowed without any monetary limit. Unlike free food and non-alcoholic
beverages, there is no specific provision under the Rules to provide vouchers for the purpose of
tea or snacks during working hours. Having said that, if the meal wallet is used towards purchase
of snacks during working hours, amount up to the extent of expenditure incurred on those may
arguably be considered as exempt from tax. While no limit on amount has been prescribed in this
regard, it should be ensured by the employer that expense amount is not disproportionate to the
expenditure incurred by the employees on such snacks and nature of business. However,
possibility of tax authorities denying the exemption by taking a contrary view cannot be ruled out.
Further, in case free snacks are provided by employer during working hours at office premises,
then it may be said that the tax exemption towards usage of meal voucher is not available.
18
Dec 2020
It is suggested that the employer inform their employees of the income-tax rules governing meal
vouchers and caution the employees for appropriate adherence to the conditions specified above.
In this regard, as a safeguard, the employer may consider obtaining a declaration from the
employees regarding the fulfilment of the conditions laid down in the Rule.
5.3 Can the employee spend the entire value stored on the Meal wallet at one go?
Basis few judicial precedents13, it can be inferred that the employer is not obligated to monitor
the end usage of the expenses incurred by the employee out of the value loaded on the card. To
alleviate any potential mis-use by the employee, it is suggested that the employer should prescribe
the guidelines on the usage of the card by the employee as per the provisions of the Act read with
Rules, and to that effect should obtain a self-declaration from each employee at the time of issuing
the card/ loading the value on the card.
It is recommended that the amount to be loaded in the card by the employer should be on a
periodical basis depending upon the actual working days in a month. Employer may decide a
commercially feasible periodicity, say, either monthly or half-yearly or annually and load the
value in the card provided to the employee, as a precautionary measure.
5.4 Is it sufficient if the employee submits a statement of the digital transactions or take an image
of the bill for uploading on to the Zaggle expense management platform to validate the
expense?
We understand below procedure/ process may be followed by employer, once a specified business
expense is incurred:
• Picture of the bill is provided to employer digitally from a mobile application by the
employee;
• Employer then will check the bill in accordance with the provisions of the Act read with
Rules, to ensure all the items in the bill are as per the specified expense; or else will reject
the bill if it contains any non-tenable expense items per specification of employer;
• If the bill is approved, employer will provide tax exemption towards such expense incurred;
• Technology platform provided by Zaggle, will keep a record of such expense/bills against
that employee.
In case above procedure shall be followed, then employee submitting the bill in digital mode to
validate the expense should be sufficient to claim tax exemption by the employee towards the
13
CIT vs. Reliance Industries Ltd (2008) 175 Taxmann 367 (Gujarat High Court); ITO vs. Goodrich Aerospace Services (P) Ltd.
(2013) 38 Taxmann 37 (Bangalore Tribunal); M/S Oracle India Pvt. Ltd.,, ... vs Department Of Income Tax on 25 July, 2013 –
(Bangalore Tribunal)
19
Dec 2020
specified expenses. However, further checks/ caution areas may additionally be considered by the
employer / Zaggle as under:
- The bills provided should be signed manually/ digitally by the employee before being
uploaded / provided to employer;
- Along with the signed bill, the employee should also sign a self-declaration (or e-declaration)
for every submission) that the bill is towards the specified expenses;
- There should always be only one mobile number linked to the multiwallet card, unless the
same is replaced with another number, per confirmation from employee to employer, for
uploading the specified expense bills.
- The employee should be asked to retain the original copy of the bills/receipts for certain
reasonable time period.
5.5 How can organizations use travel Wallet to give LTA advance? What are the compliance
measures that the employee needs to undertake to avail tax exemption? Also in what manner
this amount should be paid to an employee through wallet?
It is suggested that exemption in respect of LTA should be provided only after verification of
supporting towards actual expenditure incurred along with satisfaction of other conditions laid
down, as enumerated in Para 4.1.4.
5.6 Does the Gift wallet loading of Rs.5000 in a financial year qualify for income tax exemption
under the present I-T Rules?
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 perquisite in the
hands of the employee provided the value of the same is less than INR 5,000 (i.e., up to INR
4,999) in aggregate per annum. However, such gifts cannot be contractual in nature or based on
performance. Also, awards / long term service award or gift paid in cash is fully taxable in the
hands of the employee.
5.7 In some cases where companies give a monthly Fuel allowance to the employee to meet fuel
expenses incurred by the employee for business purposes, as per the grade / level of the
employee, what should be the treatment for the unused value at the end of the fiscal year?
We understand that any amount provided as a part of fuel expense in the fuel wallet shall be for
official purpose and over and above the cost to company of the employee. Hence, any amount
provided towards the cost of actual expenses incurred for business/ official purpose is tax exempt
in the hands of employee.
Any unspent amount at the year-end should be refunded back to the employer and in case the
same is not refunded back, such amount is required to be offered to tax in the hands of employee
20
Dec 2020
and it would be responsibility of Zaggle to confirm the same to employer so that necessary taxes
are withheld on such unspent/ unclaimed amount.
5.8 In case company wants to pay driver salary through the card (through expenses wallet, which
allows money to be withdrawn) – how the process of payment should work and what kind of
documentation is needed.
It is suggested that tax exemption of driver salary should be provided against the documentary
proof/self-declaration from the employee following the procedure / process enumerated in para
4.1.6 above. Further, the amount in expense wallet (which would facilitate cash withdrawal)
allocated by the employer would require separate analysis depending upon the nature of expenses
that are allowed under this wallet, to verify whether such amount loaded shall be eligible for tax
exemption or not in the hands of employee.
New Personal Tax Regime
The Finance Act, 2020 has introduced a new optional personal income-tax regime with moderated
tax rates/ income slabs, subject to foregoing of few specified deductions and exemptions. This
includes the exemption in respect of free food and non-alcoholic beverage provided by the
employer through paid voucher during working hours at office or business premises and
exemption towards leave travel concession amongst others. This new regime is applicable from
Financial Year 2020-21 onwards. The shall be noted by Zaggle in context of non-availability of
Income-tax benefit on meal vouchers and LTC in the hands of those employees who would opt
for such regime.
21
Dec 2020
6 Disclaimer
Our comments set forth our views based on the completeness and/or accuracy of the facts stated
and any assumptions that were included. If any of the facts and assumptions are not complete or
accurate, it is imperative that we be informed accordingly, as the inaccuracy or incompleteness
thereof could have a material effect on our conclusions.
In the preparation of this report, we have relied on the provisions of the Income-tax Act, 1961
(‘the Act’), Income-tax Rules, 1962 (Rules) as amended and made thereunder and judicial and
administrative interpretations thereof, which are subject to change or modification by subsequent
legislation or regulatory changes or administrative pronouncements or judicial decisions. Any
such change, which could be prospective, retroactive, or retrospective, could affect the validity
of our conclusions.
Unless specifically requested otherwise, we shall not update our comments for subsequent
changes or modifications to the law, to the rules/ regulations, or to the judicial and administrative
interpretations thereof.
Our comments have been prepared based on our interpretation of various regulations. Any such
change, which could be prospective, retroactive, or retrospective, could affect the validity of our
conclusions. Unless specifically requested otherwise, we shall not update our comments for
subsequent changes or modifications to the law, to the rules/ regulations, or to the judicial and
administrative interpretations thereof.
Our comments have been prepared based on our interpretation of various regulations. Our views
are not binding on any authority or Court, and hence, no assurance is given that a position
contrary to the opinions expressed herein, will not be asserted by any authority and/or sustained
by an appellate authority or a Court of law.
Our comments have been prepared for the benefit of, and from the perspective of Zaggle Prepaid
Ocean Services Private Limited and does not address any other perspective. No other person
shall be entitled to place reliance on this report. It should not be copied or disclosed to any third
party, in whole or in part. Additionally, unless otherwise agreed, our Services and Deliverable
are provided for your internal use only and on the basis that you shall not quote our name or
reproduce our logo in any form or medium without our prior written consent. The Deliverable
shall not be disclosed to any other Person without our prior written consent except as permitted
under the Agreement or except as required by law or by a competent regulatory authority (in
which case you shall, if permitted by law or regulation, promptly inform us).
22
Dec 2020
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The information contained herein is of a general nature and is not intended to address the circumstances of any particular
individual or entity. Although we endeavour to provide accurate and timely information, there can be no guarantee that such
information is accurate as of the date it is received or that it will continue to be accurate in the future. No one should act on
such information without appropriate professional advice after a thorough examination of the particular situation.
KPMG Assurance and Consulting Services LLP, Lodha Excelus, Apollo Mills Compound, NM Joshi Marg, Mahalaxmi,
Mumbai - 400 011 Phone: +91 22 3989 6000, Fax: +91 22 3983 6000.
KPMG (Registered) (a partnership firm with Registration No. BA- 62445) converted into KPMG Assurance and Consulting
Services LLP (a Limited Liability partnership firm) with LLP Registration No. AAT-0367 with effect from July 23, 2020.
The KPMG name and logo are trademarks used under license by the independent member firms of the KPMG global
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KPMG Assurance and Consulting Services LLP Telephone: +91 40 6111 6000

Salarpuria Knowledge City Fax: +91 40 6111 6799

Mr. Shashank Karhade

Date: 17th December 2020

Please acknowledge the receipt of the same.

Tax implications on various payments through Zinger Card

3. Overview of existing policy 6

Relevant Income-tax provisions

4.1.3 Business Travel expense 9

4.1.5 Fuel expense 11

4.1.6 Driver salary 12

4.2 Withholding tax obligation of employer 13

5. Response to specific queries 17

Scope Limitations for para 2:

4. Is it sufficient if the employee submits a statement of the digital transactions or take an

3 Overview of existing policy

The Meal wallet is accepted across 100,000+ food & non-

2 Gift Wallet Employers can use this wallet:

3 Travel • Companies can extend a travel / tour advance to employees who

5 Expense • A specific expense cannot be attributed in this wallet. Companies can

4 Relevant Income-Tax provisions

x The following exceptions2 have been provided in this regard:

x In substance, the electronic/ digital voucher intends to be an administrative improvement over

4.1.3 Business travel expenses

4.1.5 Fuel expense

4.1.6 Driver salary

4.2 Withholding obligation in the hands of employer:

Any unspent amount in the wallet, at the yearend should be

Hence, no withholding obligations shall arise u/s 192 of the

Any unspent amount in the wallet, at the yearend should be

Any unspent amount in the wallet, at the yearend should be

5 Expense It is our understanding that for all miscellaneous -

Basis the above, pre-loading of money into this wallet shall be

Any unspent amount in the wallet, at the yearend should be

5 Response to specific queries

Tea and Snacks:

New Personal Tax Regime

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