Gift to the employee by an employer is taxable under the head “salary” if it’s value exceed Rs 5000 during the financial year. Under this provision gift of any kind is taxable under the head income from salary including voucher or token.
Value of such gift in excess of Rs 5000 will be treated as perquisite and taxable in the hands of employee.
While deducting tax (TDS) from employee’s salary, the employer need to consider the excess amount as a part of taxable salary. If gift’s value is less than or equal to Rs 5000 then such amount will not be taxable.
When the gift amount exceeds Rs 5000, the excess amount will be taxable in the hand of employee.
For example: if employee has received a gift valuing Rs 7,500 in the financial year 2023-24 (assessment year 2024-25), then Rs 2,500 (which is in excess of Rs 5,000 (i.e. 7,500 – 5,000) will be treated as perquisite and taxable in the hands of employee.
Provisions of section 56(2) related to gift will not be applicable to employee if such gifts are received from the employer.
Other relevant points on taxability of gift
- Gift at the time of ceremonial occasions are also included in this provisions.
- Gift received by any member of the employee’s household is also covered under this provisions and as such if it’s value exceed Rs 5,000 during the financial year, then the excess amount will be treated as perquisite in the hands of employee and tax has to be deducted from it.
- Any cheques or amount credited to bank accounts as gift are also covered under this act and will be treated as perquisite.
- If employer has gifted more than once during the financial year then such amount will be taxable only when the aggregate amount for the whole financial year are in excess of Rs 5,000.
- Gift up to Rs 5,000 in aggregate per annum will be exempted.
