Diwali 2026 bonus + gift, employee + employer tax treatment.

• Section 17(2) Income Tax Act: perquisite — benefits provided by employer to employee are taxable. Diwali bonus / gift from employer is a perquisite.
• Rule 3(7)(iv): specific perquisite valuation rule for gifts from employer. Gift aggregate value <= INR 5,000 per FY per employee exempt; above INR 5,000 fully taxable (not just excess).
• Section 56(2)(x): if gift is from employer, Rule 3(7)(iv) perquisite rule applies; Section 56(2)(x) does NOT additionally apply (employer gift is a perquisite, not an unconnected gift).
• Section 192 TDS: perquisite value added to employee's monthly salary; TDS deducted at slab rate on gross salary including perquisite.
• GST: gift from employer to employee > INR 50,000 in FY is deemed supply under Schedule I Para 2 of CGST Act; GST payable by employer (ITC may be available if used for business purpose).

• Gifts in kind from employer up to INR 5,000 aggregate per employee per FY: fully exempt as perquisite.
• Includes: Diwali gift hamper, dry fruits, chocolates, small electronics, gift vouchers (up to INR 5,000 aggregate).
• If aggregate crosses INR 5,000: the ENTIRE amount (not just excess) becomes taxable perquisite. Example: Diwali gift worth INR 7,000 → INR 7,000 is taxable, not INR 2,000.
• Rule 3(7)(iv) applies only to 'gifts in kind'. Cash gift is separately treated (always fully taxable salary addition, not a gift).

Many employers calibrate Diwali gifts to stay below INR 5,000 to preserve the full exemption.

Cash bonus (added to Diwali salary):

• Fully taxable salary addition. Section 17(1).
• Section 192 TDS at slab rate.
• No exemption. INR 5,000 Rule 3(7)(iv) does NOT apply to cash.

Gift voucher (Amazon / Shoppers Stop / Big Bazaar / brand-specific):

• Treated as 'gift in kind' under Rule 3(7)(iv). INR 5,000 exemption applies.
• If voucher value > INR 5,000 (aggregate FY): fully taxable perquisite.
• Multiple small vouchers aggregating > INR 5,000: fully taxable.

Physical gift (hamper, dry fruits, chocolates, electronics):

• Treated as 'gift in kind'. INR 5,000 exemption applies.
• Valued at employer's cost (which is also fair market value typically).

Hybrid (part gift + part cash): cash portion is fully taxable salary; gift portion up to INR 5,000 exempt. Document separately.

• Schedule I Para 2 CGST Act: gift exceeding INR 50,000 in aggregate per employee per FY by employer to employee treated as deemed supply.
• Employer must pay GST on such deemed supply at applicable rate (18% / 12% / 5% depending on category of gift).
• ITC on inputs used for making the deemed supply may be available if related to business purpose — but Section 17(5)(h) blocks ITC on 'goods lost / stolen / destroyed / written off / disposed by way of gift or free samples'.
• Practical impact: gifts above INR 50,000 per employee per FY become GST-cost expensive for employer. Many employers keep per-employee Diwali gift value below INR 50,000.
• Keep per-employee gift value documented for both direct tax perquisite rule (INR 5,000) + GST deemed supply rule (INR 50,000).

• Decide form of bonus: cash salary / gift voucher / physical gift / hybrid.
• Calibrate per-employee value: below INR 5,000 for Section 17(2) exemption; below INR 50,000 for GST deemed-supply exemption.
• If above INR 5,000: add perquisite to employee's monthly payroll (October / November); increase Section 192 TDS.
• Form 24Q Q3 (October-December) will reflect perquisite in employee TDS computation.
• Form 16 (annual) shows perquisite value in Part B.
• If above INR 50,000: compute GST on deemed supply; pay in October / November GSTR-3B.
• Communication to employees: tax-inclusive vs tax-free framing of gift value.
• Last updated: 2026-10-22.