Question: What are the tax implications of gifts and bonuses received during Diwali under the Income Tax Act, 1961?

Answer 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 such gifts exceeds the prescribed threshold, the recipient may be required to declare it. amount as taxable income.

Below are the tax exemptions and provisions related to such gifts:

Also Read: SIP Calculator: Turn Your SIP Investments Into Rs 1 Cr With This Simple Strategy

Tax implications in the hands of the individual recipient of these gifts/bonuses:

Taxation of bonuses received from the employer:

In accordance with the provisions of the IT Act, any bonus received by an employee is taxable under Article 17 as part of the employee’s salary, regardless of the amount. Accordingly, the full amount of the bonus is added to the employee’s salary and taxed at the individual’s applicable income tax rates.

Further, under Section 192 of the IT Act, the employer is required to withhold tax at source from the bonus amount, thereby ensuring compliance with withholding tax obligations.

This Q&A series is published weekly on Thursdays.

Disclaimer: The views and facts shared above are those of the expert. They do not reflect the opinions of Financialexpress.com