Diwali Bonus 2025: New Tax Rules Explained — Gifts up to ₹5,000 Tax-Free, Income up to ₹12 Lakh Exempt Under New Regime

As the festive season lights up homes across India, many employers are rewarding their staff with Diwali bonuses and gifts. However, this year’s celebrations come with a few important changes in tax rules that every salaried individual should know. From cash bonuses to festival gifts, the Income Tax Department has outlined specific guidelines to determine what remains tax-free and what becomes taxable income.

Understanding the New Diwali Bonus and Gift Tax Rules

Under the latest income tax framework, gifts worth up to ₹5,000 received by employees from their employers are exempt from tax. However, if the value of gifts exceeds this limit, the entire amount becomes taxable as part of the employee’s income.

It’s also crucial to remember that cash bonuses received during Diwali — often credited along with salaries — are fully taxable. They are considered part of your total annual income and will be taxed according to the slab rates under the new tax regime.

For the financial year 2025–26, the new income tax regime offers zero tax on income up to ₹3 lakh, and after rebates and standard deductions, individuals earning up to ₹12 lakh annually may not have to pay any tax at all. This makes the new system beneficial for many middle-income earners, especially during the festive season.

Tax Exemption on Gifts from Family

While festive bonuses from employers are taxable, the Income Tax Act, Section 56, provides relief for gifts received from close relatives. Gifts received from family members such as parents, siblings, spouses, or in-laws are completely tax-exempt, regardless of the amount.

However, if you receive cash or non-cash gifts exceeding ₹50,000 in a financial year from a non-relative, the entire value of those gifts becomes taxable. This rule applies both to individual taxpayers and Hindu Undivided Families (HUFs).

So, if you receive Diwali gifts like gadgets, jewelry, or home appliances worth more than ₹50,000 from a friend, colleague, or business associate, you may have to declare them in your income tax return.

No Tax Benefit on Personal Festival Shopping

Diwali is also the season for shopping sprees — gold jewelry, electronics, clothes, sweets, and home décor items top the list. However, these personal expenses do not qualify for any tax deductions or exemptions. The Income Tax Department classifies them as personal consumption, meaning that even though they may be essential for celebrations, they do not reduce your taxable income.

Tax Treatment for Business Gifts and Festive Expenses

For business owners and professionals, the rules differ slightly. Gifts or festive expenses given for business promotion or client relations can be treated as business expenses — provided there is proper documentation. When backed by invoices or receipts, such expenses may qualify for tax deductions under business expenditure rules.

However, these must be genuine business-related gifts and not personal in nature. For example, gifting clients branded diaries or sweets during Diwali for marketing purposes may qualify, but personal luxury items would not.

Why Knowing These Rules Matters

Understanding Diwali bonus and gift taxation can help you plan your finances better and avoid unexpected tax liabilities later. Employees should keep track of the value of gifts and bonuses they receive, while business owners must maintain proper records for tax compliance.

Tax experts also advise that individuals under the new tax regime should review whether they are eligible for the ₹12 lakh income rebate, which can significantly reduce their tax burden this year.

Bottom Line

The festival of Diwali is a time of prosperity and joy — but it’s also a good time to stay financially smart. While gifts up to ₹5,000 remain tax-free and income up to ₹12 lakh may attract zero tax, larger cash bonuses and high-value gifts can increase your taxable income.

So, as you celebrate with lights, sweets, and shopping, take a moment to review your income, bonuses, and tax-saving opportunities. A little financial planning now can make your festive season truly bright — both emotionally and economically.