In the new rules it is provided that gifts in kind to employees would not be taxed upto an aggregate sum of Rs. 5K in a year. These gifts can be made at any occasion such as diwali, New Year, Christmas, marriage, birthday etc. In case of gifts exceeding in value by Rs. 5K only the excess need to be considered as taxable salary.
Care must be taken to avoid building this as compensation element in the engagement terms in which case it would become contractual and not voluntary thereby preventing employee from claiming exemption. Further this limit of Rs. 5K is set for all members of the household taken together and not individually.
Free Meals
The limit of Rs. 50 per meal has been set as exemption limit for this purpose as staff welfare measure. Only the excess cost (net of employee recoveries) needs to be considered as taxable salary. For this purpose it is desired for an employer to have direct arrangements with the caterer/restaurant. By a specific clarification expenses on tea, coffee, non-alcoholic beverages, snacks etc. are to be ignored.