Received Diwali Bonus or Holi Bonus via cash, gift card, e-voucher, prepaid cards? Know the income tax implications
Many corporate and government employees receive Holi or Diwali bonuses in various forms. It’s not always cash; bonuses can come as e-vouchers, gift cards, or prepaid cards issued by banks.
Here’s how these bonuses are taxed,
Cash Gifts
Cash gifts from employers are fully taxable as salary income, without any exemption limit. This means any amount of cash gift is taxable under both old and new tax regimes.
Gift Cards
Gift cards (Woohoo, Pine Perks, Amazon etc.), whether from a marketplace or a specific brand, are taxable if their value exceeds Rs 5,000 in a financial year. The amount over Rs 5,000 is taxable as perquisites under the salary income head.
E-Vouchers
E-vouchers, different from physical gift cards, are also taxable if their value exceeds Rs 5,000 in a financial year. These vouchers are considered taxable perquisites under salary income.
Prepaid Gift Cards
Prepaid gift cards issued by banks and others are treated as taxable compensation if their value exceeds Rs 5,000 in a financial year. These cards are considered cash equivalents and are taxable under the salary head.
It’s important to note that the tax implications vary based on the form in which the bonus is received. Understanding these implications can help employees plan their taxes better.
Expert’s Opinion:
Amit Kumar Singh from Taxmann says “Any amount surpassing Rs 5,000 in a financial year becomes taxable in the hands of the employee as perquisites under salary income. Suppose an employee received a gift card of Rs 4,500 during Diwali and Rs 1,000 gift card on his birthday from his employer. The aggregate amount of gift cards received by the employee during the year is Rs (4,500+1000) = Rs 5,500. Hence Rs 500 is taxable for the employee.”