Diwali or any other occasion means a time for celebration. During these special moments, people tend to spend a lot; correspondingly, during festive seasons, there are huge chances for extra incomes as well. Companies give bonuses to their employees. Bonus means extra money. But is this money tax-free?
Which are not tax-free?
Tax experts say that not all Diwali gifts are tax-free. Failure to report them properly could result in a notice from the Income Tax Department. Gifts received from an employer are not subject to income tax if the value of the gift does not exceed ₹5,000. This means that items like a box of sweets, a small gadget, or festive apparel, which typically cost up to this amount, will not be taxable. If a Diwali gift from your employer is worth more than ₹5,000, you’ll be taxable. This means that expensive electronics products, gold or silver jewelry, or any other expensive gift worth more than ₹5,000 will be taxable.
Know the rule
Tax experts say that if you receive one or several gifts worth more than ₹5,000, you’ll need to calculate their value and add them to your income. These gifts will then be taxed according to your tax slab. Experts say that if you receive a cash bonus from your employer on Diwali, it will be considered part of your salary and you will be taxed on it. This can be easily understood with an example. Suppose you receive a bonus of Rs 30,000 on Diwali. This will be added to your annual income and will then be taxed according to your income tax slab.
Cash bonuses received on Diwali are not exempt from tax. If you received a cash bonus this Diwali, you’ll need to disclose it in your income tax return next year. Failing to report it could result in a notice from the Income Tax Department. Especially if you received a large cash bonus, such as one lakh or two lakh rupees, you must disclose it. Failure to do so could result in an Income Tax notice.