When you receive your payslip this month, you need to carefully review it. With Diwali just gone by, many employees may see a festive bonus or a voucher credited to their accounts. A common practice in India, receiving gifts or bonuses from employers can also come with tax obligations.
ALSO READ: From Gold Coins To Diet Coke: What Diwali Shopping Carts Reveal About India's Consumption
Even though coming from the same employer, your Diwali bonus and your Diwali gift are taxed differently. While bonuses and gifts can feel like free money, it is important to understand their financial context so that you can handle your money without any added stress.
Also Read | Layoffs Are Rising In Tech, But These Skills Are Helping People Unlock Better Pay
What Happens To Bonus?
Imagine that your salary is Rs 12.5 lakh per year. Under the new tax regime, the effective tax on income up to Rs 12.75 lakh per year becomes zero for salaried people. Now assuming that your employer gives you a Rs 50,000 bonus in November as a Diwali gift.
Wealth management platform Fynprint explains that this bonus is not free money as it does not get any exemption. This means that the bonus will be taxed as your salary.
Salary: Rs 12.5 lakh
Bonus: Rs 50,000
New income: Rs 13 lakh
Standard deduction: Rs 75,000
Taxable salary: Rs 12.25 lakh
Effective tax after marginal relief: Rs 26,000
This means that your Rs 50,000 bonus is worth roughly Rs 24,000 in hand after taxes.
How A Voucher Is Treated
As per the tax rules, gifts and vouchers from your employer are tax-free only if they total less than Rs 15,000 per financial year.
Imagine you receive a Rs 18,000 voucher from your employer. Since it crosses the Rs 15,000 threshold, the entire amount is taxed as salary. This means that while Rs 18,000 becomes fully taxable, the Rs 13,000 voucher would have been entirely tax-free.
ALSO READ: 20 Employees, Over Rs 1 Lakh Each: Surat Businessman's Diwali Gesture Goes Viral
By knowing the difference in tax treatment and applicable thresholds, you can make informed investment decisions. If you get the option to choose between the voucher and bonus, make sure to compare their tax implications to optimise your finances.
Essential Business Intelligence, Sharp Market Insights, Practical Personal Finance Advice, Daily Fuel, Gold and Silver Prices and Latest Stories — On NDTV Profit.
