Question: What are the tax implications for gifts and bonuses received during Diwali under the Income Tax Act, 1961?
Response given by CA (Dr.) Suresh Surana:During Diwali, individuals often receive gifts from employers, relatives, and friends. It is essential to understand that, under the provisions of the Income Tax Act, 1961 (hereinafter referred to as the “IT Act”), if the total value of these gifts exceeds the prescribed threshold limit, the recipient may be required to report this amount as taxable income.
Below are the exemptions and taxability provisions related to such gifts:
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Tax implications in the hands of the individual recipient of such gifts / bonuses:
GiverAsset typeTaxabilitySpecified Threshold LimitEmployerCash or non-monetary itemsWhole amount is Taxable as perquisite. Exemption is only with respect to any gifts received of value upto Rs. 5,000Rs. 5,000RelativesCash or non-monetary itemsNot taxable. No thresholdNon-RelativesCash or non-monetary itemsTaxable as “Income from Other Sources” if the amount exceeds the specified threshold limit. Rs. 50,000
Taxation of Bonus received from Employer:
In accordance with the provisions of the I-T Act, any bonus received by an employee is taxable under Section 17 as part of the employee’s salary, regardless of the amount. As a result, the entire bonus amount is added to the employee’s salary and taxed according to the individual’s applicable income tax slab rates.
Furthermore, under Section 192 of the I-T Act, the employer is required to deduct tax at source on the bonus amount, ensuring compliance with the withholding tax obligations.
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Disclaimer: The views and facts shared above are those of the expert. They do not reflect the views of financialexpress.com
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