Synopsis: The Draft Income Tax Rules 2026 proposes increasing the tax free value of employer provided meals for salaried employees from ₹50 to ₹200 per meal. The proposal shows the government’s intent to improvise existing rules and align tax exemptions with current cost.
India’s income tax department is going through a big change with the introduction of the new Income-tax Act, 2025. This shift is intended to replace the old Income-tax Act of 1961. As part of this change the Central Board of Direct Taxes (CBDT) has released the Draft Income Tax Rules, 2026.
Among several procedural and valuation changes proposed in these draft rules, one proposal has attracted particular attention from salaried taxpayers: the increase in the tax-free limit for employer provided meals from the current ₹50 per meal to ₹200 per meal.
Though this change is still at the draft stage, it represents a notable shift in how employee perquisites may be valued going forward. This change is beneficial for millions of salaried employees who receive meals at the workplace or through employer arranged food facilities.
Draft Income Tax Rules: What Draft Really Means
It is important to first understand the legal status of the Draft Income Tax Rules, 2026. Draft rules are not enforceable laws. They are released to explain how provisions of the parent Act will be implemented in practice. It is also to seek feedback from taxpayers, employers, professionals, and industry bodies – which currently is active on the MYGOV website.
Only after considering public comments/feedback and making revisions does the government notify the final rules in the Official Gazette. Until that notification happens the existing rules and limits continue to apply. Therefore, the proposed ₹200 per meal exemption should be viewed as a policy intent under consideration not as an assured tax benefit.
Current Taxes of Employer-Provided Meals
In the existing Income-tax Rules the meals provided by an employer during working hours are treated as a perquisite. However, a specific exemption is available if the value of the meal does not exceed ₹50 per meal.
Any amount exceeding ₹50 per meal is treated as a taxable perquisite and added to the employee’s salary income for tax purposes. This ₹50 limit was introduced many years ago and has remained unchanged despite substantial increases in food prices and living costs.
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What the Draft Income Tax Rules 2026 Propose
The Draft Income Tax Rules 2026 propose revising the per-meal exemption limit from ₹50 to ₹200. Some of the major aspects of the proposal includes the exemption would apply to food and non-alcoholic beverages and meals must be provided during working hours. Additionally, valuation would continue to be based on the employer’s cost of providing the meal and thus, any amount beyond the prescribed limit would still be taxable.
Impact on Salaried Employees
If an employer provides meals worth ₹150 per working day:
- Under the current rules, ₹100 per day may be taxable
- Under the draft proposal the entire ₹150 could become tax-free
Over a year, this could reduce taxable income by several thousand rupees. The salaried individuals could benefit from this new proposal as this can work in their favor in saving up some of the sum when it accumulates.
Applicable Across Income Levels?
The benefit is not specific to any sort of income level. Instead employees across salary bands who receive employer provided meals stand to gain proportionately. Though the absolute tax saving would be higher for those in higher tax brackets.
Applicable Under Both Tax Regimes?
The draft rules indicate that revised perquisite valuation norms would apply under both the old tax regime and the new tax regime. This is important because many exemptions and deductions are unavailable majorly under the new regime. However, perquisite valuation rules usually apply uniformly unless specifically excluded.
Impact on Employers and Payroll Administration
The proposed change may have several implications if we look from an employer’s perspective:
- Employers may reassess the composition of compensation packages
- Payroll systems will need updates once final rules are notified
- Clear records of meal costs and provisioning methods will be required
What This Proposal Does Not Do
It is equally important to clarify what the draft proposal does not imply and what it would not provide. For instance, it does not automatically mandate employers to provide meals worth ₹200 and it also does not convert meal reimbursements into tax-free benefits by default. Only meals actually provided by the employer which is subject to conditions specified in the final rules would qualify for the exemption.
Quick Overview Table
Conclusion
The proposal to increase the tax-free meal benefit to ₹200 per meal under the Draft Income Tax Rules 2026 is a novel move in India’s income tax system. If finalized the change could offer some tax relief to salaried employees. However, it is important to remember that these provisions remain at the draft stage.
