No-Additional-Cost Service Law and Legal Definition

No-additional-cost service refers to those services that are provided to the employees free of tax by the employers, without incurring any additional cost. Such services are offered either free of cost or upon a reduced rate. It includes those services that an employer in the ordinary course of his/her business offer to the general public. For instance, a company vehicle might allow its employee to travel free of cost if it have empty seats. While calculating income tax the value of no-additional-cost service is excluded from the income and wages of an employee who received such service.

The term "no-additional-cost service" is defined under 26 USCS § 132 (b) as any service provided by an employer to an employee for use by such employee if:

1) such service is offered for sale to customers in the ordinary course of the line of business of the employer in which the employee is performing services, and

(2) the employer incurs no substantial additional cost (including forgone revenue) in providing such service to the employee (determined without regard to any amount paid by the employee for such service).