Diwali bonuses and gifts from employers are subject to different income tax rules. While qualifying gifts worth less than ₹15,000 in aggregate during a tax year can be tax-free, cash bonuses are treated as salary income and are taxable under the applicable income tax rules.
The Income-tax Act, 2025, and Income-tax Rules, 2026, which came into effect on April 1, 2026, increased the exemption threshold for qualifying employer gifts from ₹5,000 to less than ₹15,000 annually.
The distinction is particularly important for salaried employees whose taxable income is close to ₹12 lakh under the new tax regime. An additional Diwali bonus could push their income above the rebate threshold and increase their tax liability.
How much can you receive in Diwali gifts from your employer tax-free?
Under Rule 15 of the Income-tax Rules, 2026, gifts, vouchers and tokens received from an employer are assigned a nil taxable value if their combined value remains below ₹15,000 during the tax year.
The exemption covers qualifying gifts received by employees or members of their household, including festive hampers, physical gifts and shopping vouchers.
For example, if an employee receives a Diwali hamper worth ₹8,000 and another gift worth ₹5,000 from the employer during the same tax year, the combined value of ₹13,000 remains tax-free.
However, if the aggregate value reaches or exceeds ₹15,000, the entire amount becomes taxable as a perquisite, rather than just the amount exceeding the threshold.
The exemption applies to the entire tax year and cannot be claimed separately for Diwali, birthdays or other occasions.
Is Diwali bonus taxable under the new income tax regime?
Unlike qualifying gifts and vouchers, a cash Diwali bonus paid by an employer is treated as salary income and is taxable under both the old and new tax regimes.
The amount is added to the employee’s annual salary and taxed according to the applicable income tax slabs. The ₹15,000 exemption for qualifying gifts does not apply to cash bonuses, even if they are paid during the festive season.
For instance, if an employee receives a Diwali bonus of ₹50,000, the amount is included in their total salary income for tax calculations.
However, the actual tax payable depends on the employee’s total taxable income, applicable deductions and rebate eligibility.
Can a Diwali bonus affect your ₹12 lakh tax rebate eligibility?
Under Section 156 of the Income-tax Act, 2025, eligible resident individuals opting for the new tax regime can claim a rebate of up to ₹60,000 if their total taxable income does not exceed ₹12 lakh. Marginal relief is available in specified cases where taxable income exceeds this threshold.
For salaried employees, the standard deduction of ₹75,000 means annual salary income of up to ₹12.75 lakh can generally result in nil income tax, provided there is no other taxable income and the rebate conditions are met.
Consider an employee earning an annual salary of ₹12.60 lakh. After claiming the standard deduction of ₹75,000 under the new tax regime, the employee’s taxable income comes to ₹11.85 lakh, keeping it within the ₹12 lakh rebate threshold.
Now, assume the employee received a Diwali bonus of ₹50,000. The total gross salary would increase to ₹13.10 lakh. After the standard deduction of ₹75,000, taxable income would rise to ₹12.35 lakh.
This takes the employee above the ₹12 lakh rebate threshold, making them ineligible for the full rebate. However, marginal relief limits the additional tax burden.
Based on the applicable new-regime income tax slabs, the tax payable after marginal relief works out to ₹35,000. Including 4% health and education cess, the total tax liability comes to ₹36,400, assuming no other income or deductions.
This means the employee would not retain the entire ₹50,000 bonus as additional take-home income.
How to check TDS on your Diwali bonus?
Employers are required to account for taxable salary and perquisites while calculating tax deducted at source (TDS).
Employees who received Diwali bonuses or gifts should review their salary slips to check whether the amounts have been correctly included in their taxable income and whether the applicable TDS has been deducted. They should also reconcile their salary and TDS details with Form 130, the salary TDS certificate under the Income-tax Act, 2025, which replaces Form 16 for tax year 2026-27 onwards.