A variety of the companies current Diwali Bonus to their employees. The Bonus is normally supplied in cash. Some companies moreover current Diwali Bonus in alternative. Whereas it is the employee’s prerogative to resolve on how one can spend or use the Diwali Bonus, you may have to focus on the earnings tax pointers that apply to the bonus supplied by the employer. In an e-mail correspondence interaction with FE On-line, Dr Suresh Surana, Founder, RSM India, outlined the numerous tax implications on Diwali Bonus acquired by employees from their employers. Excerpts:
What are the tax pointers that apply to Diwali Bonus?
As per the provisions of IT Act, Bonus acquired by an employee contained within the type of cash shall be chargeable to tax beneath ‘Income from Wage’ and the equal may most likely be subjected to tax in accordance with the slab payments.
How lots Diwali Bonus attraction to tax?
As acknowledged above, the entire amount acquired as Diwali Bonus might be taxable on the slab value related to the employee.
How lots tax an employee ought to pay if receiving Rs 1 lakh as a Diwali bonus?
The taxation of the bonus would rely upon the Full Income of the Employee. The Diwali bonus may most likely be taxable beneath the very best ‘Income from Wage’ and taxed on the slab payments related to the taxpayer. Nonetheless, in opposition to such bonus, the taxpayer may most likely be eligible to say Widespread deduction of wage, each fully totally different deduction and exemption counting on the character of earnings and investments.
Will I’ve to pay tax if receiving the Diwali bonus in alternative, and definitely not in cash?
As per Rule 3(7)(iv) of the IT Pointers, if an employee receives a Diwali reward in alternative (vouchers/hampers/token) and the mixture value of such alternative is Rs. 5,000 or additional in a FY, then the equal shall be matter to tax as a perquisite beneath the very best ‘Wage’. If, the mixture amount of alternative is decrease than Rs. 5,000, the equal might be exempt from tax. It is pertinent to note that in case the brink is crossed, all the amount acquired may most likely be subjected to tax.
How lots tax will I’ve to pay if my firm affords a gold coin or a automobile as a Diwali bonus?
The taxation recommendations on gold coin or automobile as Diwali bonus is as talked about above
Are there strategies to keep away from losing loads of a wide range of tax on Diwali Bonus?
No there will not be any specific tax deductions accessible available on the market on bonus acquired, aside from the bounds as talked about above.
What are a great deal of the simplest strategies by which one ought to make investments Diwali bonus?
In instantly’s date, there are pretty a few financial gadgets the place a person can Make investments his/her surplus funds. Among the many many many hottest funding decisions are as follows:
1. Authorities Bonds
2. Public Provident Fund
3. Pension Funds
4. Mutual Funds
5. Equity Shares / Debentures / Worldwide Shares
Apart from this, only a few various parts that an individual ought to take into accounts are his/her hazard urge for meals, required value of return, time horizon, availability of funds, transaction costs, and so forth. as a solution to choose the correct funding risk.