Explained: Do you have to pay taxes on the Diwali bonus / gift? If yes how much


NEW DELHI: It’s that time of year when we all look forward to our Diwali bonuses or gift vouchers but did you know that there is no tax exemption on gifts received from the employer?
Any gift voucher over Rs 5,000 will be considered as part of your salary and will be taxed according to your income tax brackets, and any amount directly credited to your account will be considered as part of your salary, and therefore taxed as Phone .
This means that your employer is also required to levy taxes in advance. And if you receive the amount in cash, the best practice is to always disclose the receipts on tax returns so that your tax payable can be assessed correctly.
For example, a company decided to give a bonus of Rs 4000 to all its employees on Diwali. Indian income tax laws treat any amount received by an employer as salary. So even if the bonus amount is less than Rs 5,000, it will be taxable as income below the chef’s wages in the tax return. If the employer does not withhold tax at source, the employee must declare the donation under the heading “wages”.
Let us now take the case of another company, which decided to grant a bonus of Rs 4,999 to its employees in the form of a token or voucher. Here the amount will not be subject to tax since the total value is less than Rs 5,000. But if it was a voucher of Rs 5,001, it would have been treated as wage income and then taxed according to the relevant tax base.
To note : The limit of Rs 5,000 applies to an entire financial year, so the total value of all freebies and bonuses in any given year must be less than Rs 5,000 for it to remain tax-free. .
What about Diwali Gifts friends?
There is good news here, as gifts of up to Rs 50,000 from friends or unrelated persons are not taxable. This means that if you received a gift up to Rs 49,000 it is tax exempt, but if the total value reaches even Rs 50,001 in any given fiscal year then tax is applicable on the whole amount. And here’s the caveat: the Rs 50,000 exemption is an aggregate total.
So if three different people offered you Rs 20,000, Rs 15,000 and Rs 26,000 during a given fiscal year, then your exemption limit will be exceeded and you will be taxed on the total amount of Rs 55,000 and not only on the balance of Rs. 5,000.
What about a gift from my husband, parents or siblings?
Any donation received from relatives such as a spouse, a brother or a sister, parents or any descendant or direct ascendant of a person or a spouse, is exempt from tax. If a gift of Rs 1,000,000 is received from my mother, then the same is not taxable in the hands of the recipient. But any interest or profit on investment from this donation will be taxable according to the income tax bracket applicable to you.
What if I was assigned a building?
When you receive real property without any consideration as a gift, you pay nothing to the donor. But the value of the property’s stamp duty will be considered the property’s value for tax purposes. But if the property is transferred with insufficient consideration, the value of the stamp duty exceeding the value of the consideration is taxed.
And the gold earrings?
For jewelry, the fair market value of these items is taxable.


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