Diwali 2025 Bonuses and Gifts: What Employees Should Know About Taxes

The festive spirit of Diwali has taken over the nation, and with it comes the tradition of companies giving bonuses and gifts to their employees. While many organizations have already distributed Diwali bonuses and gifts, some are yet to do so, leaving employees eagerly waiting.

During this time, employees may receive cash bonuses, gift vouchers, sweets, or gadgets. But here’s something you should know — these festive perks may not always be tax-free.

Are Diwali Gifts Tax-Exempt?

Contrary to popular belief, not all festive gifts are exempt from tax. As per the Income Tax Act, gifts received by an employee in a financial year are tax-free only if their total value does not exceed ₹5,000. Examples of tax-exempt gifts include sweets, clothes, small electronics, and gift vouchers within this limit. Gifts under this threshold do not need to be added to the employee’s taxable income.

When Gifts Become Taxable

If the total value of gifts exceeds ₹5,000, the entire amount is considered taxable and added to the employee’s annual income as a perquisite. For example, a laptop worth ₹10,000 or a voucher valued at ₹7,000 will be fully taxable.

Diwali Cash Bonuses Are Fully Taxable

Cash bonuses given during Diwali are always taxable. These are treated as part of the employee’s salary. For instance, a ₹30,000 Diwali bonus will be added to your annual salary and taxed according to your income tax slab.

Filing ITR: What to Watch Out For

Employees must report any gifts exceeding ₹5,000 in their Income Tax Return (ITR). Failure to do so may result in notices from the Income Tax Department. While your employer’s Form 16 may include these details, it’s advisable to verify them yourself to avoid any issues.