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Income Tax Rules: Only a few days are left for Diwali. People give gifts to each other on this festival. The price of the gift also depends on how deep your relationship is with the person. On this festival, employees are also excited about receiving gifts (Diwali Gift) and bonus (Diwali Bonus) from their company. But do you know that these gifts and bonuses can be taxable (Tax on Diwali gift)? That means you may have to pay tax on these under Income Tax Rules.
Today we will tell you about the taxes applicable on Diwali and bonus and ways to avoid these taxes (Tax Saving Tips).
Tax on Diwali gifts and bonuses
Under the Income Tax Act, any gift or bonus received from a company is considered a perquisite and is taxable as part of your salary. Therefore, the tax levied on bonus income will be decided as per your overall tax slab.
However, some Diwali gifts and bonuses are not taxable.
Gifts up to Rs 5,000: Gifts up to Rs 5,000 received from a company are not taxable.
Gifts received from others: Gifts received from non-relatives, such as customers or suppliers, are generally not taxable, regardless of their value.
Tips to save tax on Diwali gifts and bonuses
If you want to avoid paying tax on your Diwali gifts and bonuses, you need to consider these tax avoidance methods:
Claim Rebate: If the value of your Diwali gift is up to Rs 5,000, you can claim the exemption by showing documents related to the gift.
Save tax on expensive gifts like this: If your company is going to give you a gift worth more than Rs 5,000, you can request them to structure the gift in a way that you do not have to pay tax on it. For example, they may give you a gift voucher up to Rs 5,000 and give the remaining amount as a bonus.
Choose these options instead of cash: Instead of cash, it would be a better option to give gift vouchers, gold coins or any equipment. Because generally these are less likely to be taxed as compared to cash bonuses.
Donate: If your company allows you to donate a part of the Diwali bonus to a recognized charity, you can claim tax deduction on the amount donated.
Apart from these tips, there are a few other things to keep in mind when it comes to tax on Diwali gifts and bonuses:
Source of gift: Gifts received from a friend or non-relative are generally not taxable, regardless of their value. However, if a relative sends you a gift, it may be taxable if its value exceeds a certain limit.
Some types of gifts, such as cash or jewelry, are more likely to be taxed than other gifts.