Received Diwali bonus or cash from your employer? Know ₹15,000 exemption limit and when income tax applies | Explained

With Diwali celebrations over, salaried employees should understand how employers' festive gifts, vouchers and cash bonuses are taxed. The rules prescribe different tax treatments for these benefits, which can affect employees' taxable income and overall tax liability.

With Diwali celebrations over, salaried employees who received festive gifts or bonuses from their employers should understand how these benefits are treated under income tax rules. While gifts and shopping vouchers may qualify for an exemption within the prescribed annual limit, cash bonuses are generally taxable as salary income.

The distinction matters when calculating taxable income and checking eligibility for tax rebates. The rules are now governed under the Income-tax Act, 2025, and the Income-tax Rules, 2026, which came into effect on 1 April 2026.

Here is what employees should know about the tax treatment of their festive rewards.

What is tax-free limit on gifts received from employers?

Under the Income-tax Act 2025, the taxable value of qualifying gifts, vouchers and tokens received from an employer is nil if their combined value is below ₹15,000 during a tax year.

The provision also covers gifts received by members of an employee's household from the employer. It applies to gifts given on ceremonial occasions and in other scenarios, meaning the exemption is not restricted to Diwali.

For instance, if your employer gives you a festive voucher worth ₹9,000 and a shopping voucher worth ₹5,000 during the same tax year, the combined value of ₹14,000 qualifies for the exemption.

However, if the aggregate value exceeds ₹15,000, the exemption is no longer available, and the entire amount is treated as a taxable perquisite. This value is added to your taxable salary and taxed at the applicable income tax slab rate.

For tax year 2026-27, this means employees must account for qualifying gifts received between 1 April 2026 and 31 March 2027, rather than calculating the limit separately for each festival.

Does cash Diwali bonus qualify for the ₹15,000 exemption?

No. A cash bonus is different from a gift or voucher for income tax purposes. It is treated as salary income and included in the employee's taxable earnings.

Gifts given in cash or in a form convertible into money, such as gift cheques, are fully taxable.

This means a Diwali cash bonus cannot be treated as tax-exempt under the ₹15,000 gift exemption. The amount is added to the employee's salary and taxed under the applicable income tax slabs in the chosen old or new tax regime.

Salaried employees can claim a standard deduction of ₹75,000 under the new regime. Consequently, salary income of up to ₹12.75 lakh may result in zero tax, provided the employee has no other taxable income and meets the rebate conditions.

Suppose an employee earns an annual salary of ₹12 lakh and receives a Diwali bonus of ₹50,000. After the ₹75,000 standard deduction, their taxable income becomes ₹11.75 lakh, so they remain eligible for the full rebate and pay zero tax under the new regime.

However, if the bonus pushes gross salary beyond ₹12.75 lakh, taxable income will exceed ₹12 lakh, potentially triggering a tax liability. In this case, marginal relief may limit the additional tax payable.

What should employees check in their salary slips?

Employees should check whether their cash bonus has been included in salary calculations and whether taxable gifts exceeding the exemption threshold have been accounted for as perquisites.

They should also review the tax deducted at source (TDS) reflected in their payroll records.

How should employees report these benefits in their ITR?

Employers are responsible for determining the tax treatment of gifts, vouchers, and bonuses and accounting for taxable amounts through payroll. Any taxable perquisites and salary components should be reflected in the employee's salary TDS certificate.

Under the Income-tax Act, 2025, Form 130 replaces Form 16 for salary TDS certificates from tax year 2026-27 onwards. Employees should verify the income and TDS details mentioned in the certificate against their salary slips and use the information when filing their income tax returns in July 2027.

The final tax liability will depend on total income, the chosen tax regime, eligible deductions, and rebate conditions.