Diwali is just around the corner, and with it comes the excitement of receiving gifts and bonuses from your employer. However, what many people don’t realize is that these gifts and bonuses can be taxable. In this blog post, we will discuss the tax implications of Diwali gifts and bonuses and provide some tips on how to avoid paying tax on them.
Also Read– GST panels propose slew of tax tweaks; rate changes likely for 100+ products
Taxability of Diwali gifts and bonuses
Under the Income Tax Act, any gift or bonus received from an employer is considered as perquisite and is taxable as part of your salary income. The tax rate applicable on such income will depend on your overall income slab.
However, there are certain exemptions available for Diwali gifts and bonuses.
Gifts up to Rs. 5,000: Gifts received from an employer up to a value of Rs. 5,000 are exempt from tax.
Gifts from a non-relative: Gifts received from a non-relative, such as a customer or supplier, are generally exempt from tax, irrespective of their value.
Tips to avoid tax on Diwali gifts and bonuses
If you want to avoid paying tax on your Diwali gifts and bonuses, you can follow these tips:
Claim the exemption: If your Diwali gift is valued up to Rs. 5,000, you can claim the exemption by submitting the necessary documents to your employer.
Structure the gift: If your employer is planning to give you a gift worth more than Rs. 5,000, you can request them to structure the gift in a way that it falls within the exempt limit. For example, they can give you a gift voucher worth Rs. 5,000 and a cash bonus of the remaining amount.
Also Read– Fixed deposit interest rates: See 3-year FD rates for seven banks including SBI, HDFC, PNB, ICICI
Opt for non-cash gifts: Non-cash gifts, such as gift vouchers, gold coins, or appliances, are generally less likely to be taxed than cash bonuses.
Contribute to a recognized charity: If your employer allows you to donate a portion of your Diwali bonus to a recognized charity, you can claim a tax deduction for the donated amount.
Consider salary sacrifice: If your employer offers a salary sacrifice scheme, you can use it to reduce your taxable income by contributing to a retirement plan or other approved benefits.
Additional considerations
In addition to the above tips, there are a few other things to keep in mind regarding the taxability of Diwali gifts and bonuses:
Read More: Can the 12% GST slab be done away with to simplify the tax framework?
The source of the gift: If you receive a gift from a non-relative, it is generally exempt from tax, irrespective of its value. However, if you receive a gift from a relative, it may be taxable if it exceeds a certain limit.
The occasion of the gift: Diwali gifts are generally exempt from tax if they are given on the occasion of Diwali. However, if a gift is given on a different occasion, it may be taxable.
The nature of the gift: Certain types of gifts, such as cash or jewellery, are more likely to be taxed than others
Diwali gifts and bonuses can be a great way to celebrate the festival with your employees. However, it is important to be aware of the tax implications of such gifts and bonuses. By following the tips discussed in this blog post, you can help your employees avoid paying unnecessary taxes on their Diwali gifts and bonuses.
For more news like this visit Officenewz.com
