Are Diwali gifts or bonuses from office is taxable or not ?

Do not forget to declare your gifts while filing your income tax return (ITR). Check whether the gift you receive on Diwali from your friends, relatives or your employer is taxable.

Although the Gift Tax Act was abolished in 1998, all gifts you receive during Diwali or any other festival may not be tax exempt. Not only do you have to declare all gifts while filing your income tax return (ITR), you may also have to shell out income tax on gifts according to your tax slab. It is important to understand which gifts are taxed and which are not

Tax liability on Diwali gift or Diwali bonus from employer

If you receive any gift voucher or token worth more than ₹ 5,000 from your employer on any ceremonial occasion like Diwali or New Year, then it is treated as part of your salary and taxed according to your tax slab.

The tax exemption is limited to gift vouchers or tokens totalling less than ₹ 5,000 in any given financial year. Therefore, if you receive two vouchers totalling more than ₹ 5,000 during a financial year then you will be taxed.

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There is no tax exemption on cash given as a gift by an employer. Mistry points out that even if you get ₹ 2,000 cash from your employer, it is taxable as income from salary income.

Diwali gift from friends:

The tax-free limit in this case is ₹ 50,000 per year. If the total value of gifts received during a financial year is more than ₹ 50,000, then it is counted as income from other sources and taxed according to your tax slab.

Tax expert Mousami Nagarsenkar says the ₹ 50,000 exemption is aggregate. For example, if you receive three gifts worth 20,000 each, then you are breaching that ₹ 50,000 exemption limit and will be taxed on the whole ₹ 60,000, rather than the difference of ₹ 10,000.

Gifts from relatives:

Gifts received from relatives are fully exempt but any income derived from that gift is taxable in the hands of the donor. For this purpose, relatives have been defined as spouse, siblings of self/spouse, parents/grandparents of self/spouse, etc.

For example, if you make a gift of ₹ 1 lakh to your wife on Diwali or at any other time during the year, then there is no tax liability for her. But any income she derives from that gift, like interest or profit on investment, will be taxable in your income tax returns.

However, if you receive a gift from someone on the occasion of your marriage or as part of a will, then he is exempt from tax.

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