Draft Income-tax Rules 2026 seek to increase tax-free meal benefit for employees to Rs 200 per meal

Currently, workplace meals up to Rs 50 per plate are tax-free. (Image: AI Generated)

• Draft Income-tax Rules, 2026 rationalise perquisite thresholds for employees
• New rules detail tax treatment for meals, gifts, education, and motor cars
• Perquisite valuation aligns with market rates, enhancing salary tax framework

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Meals provided by an employer during working hours are proposed to remain tax-free up to Rs 200 per meal under the draft Income-tax Rules, 2026, issued by the Income Tax Department on February 6.

Currently, meals up to Rs 50 per plate are tax-free. The draft rules aim to significantly increase this threshold to Rs 200 per meal.

Perquisite threshold revamp

Framed under the New Income Tax Act, 2025, these rules, which will come into effect from April 1, 2026, lay down detailed procedures for employees and salaried taxpayers.

Besides raising the tax-free benefits for employees, the draft also seeks to revamp perquisite thresholds covering employer-provided gifts, educational facilities for employees’ family members, and the use of employer-owned motor cars.

Currently, the perquisite thresholds set the specified monetary limits, which are either tax-free or taxed at a concessional rate under income-tax rules.

What changes?

Tax experts say this adjustment is expected to improve the perquisite taxation framework for salaried employees.

"The upward revision of perquisite valuation under the Income-tax Rules, which remained static for several decades, represents a substantive recalibration of the tax treatment of employee benefits,” said Sandeepp Jhunjhunwala, Partner, Nangia Global Advisors.

Rule 15 of the Draft Income Tax Rules, 2026, states that the “valuation of perquisites shall be determined in accordance with the provisions of this rule for the purpose of computing income chargeable under the head ‘Salaries’.”

In simple terms, this provision explains how the tax value of employee benefits (perquisites) will be calculated under the Draft Income Tax Rules, 2026.

For benefits such as club memberships, travel facilities, or similar privileges (excluding mobile phone expenses), the taxable value will be based on the employer’s cost at market (arm’s length) rates, minus any amount an employee contributes. Likewise, the value of any gift received by the employee shall be the amount of such gift.

That said, Rule 15 also specifies conditions for taxing employee benefits.  For example, any concession on the value of gifts received by an employee will be treated as ‘nil’ if the total value of such gifts is below the threshold of Rs 15,000 during the tax year.