Festive generosity is good business — and it has tax edges worth knowing before the hampers are ordered. The general landscape (verify specifics with your CA; thresholds and interpretations evolve):
Gifts to Employees
Gifts in kind to an employee are generally treated as a tax-free perquisite only up to a modest annual threshold (historically ₹5,000 in aggregate per year); beyond it, the value is typically taxable in the employee’s hands. Cash and cash-equivalents (gift cards) are generally taxable regardless of amount — a ₹5,000 hamper and a ₹5,000 voucher are not twins in the tax code. A Diwali bonus is simply salary: taxable, deductible to you as employee cost.
GST on Your Gift Purchases
Two edges most owners miss: input tax credit is generally blocked on goods given as gifts; and gifts to an employee beyond a threshold (₹50,000 per employee per year under schedule provisions) can attract GST as a deemed supply. Translation: price the hamper’s true cost with ITC blocked, and keep per-head generosity documented.
Gifts to Clients
Reasonable business-promotion expenses are generally deductible for income tax — keep invoices and a recipient register — while the GST input credit stays blocked for gifted goods. Branded items bought as promotional material sit differently from personal gifts; your CA can draw that line for your facts.
The Owner’s Festive Checklist
- Budget gifting from the season’s margin, not the overdraft — working capital is for stock, not hampers
- Decide kind vs cash with the tax treatment in mind
- Keep invoices, recipient lists, and board/partner approvals for larger spends
- Pay any team bonus through payroll, cleanly
Important: This article is general information, not tax advice. Thresholds, rates and interpretations change and depend on your facts — confirm current Income Tax and GST positions with your chartered accountant before acting. FundsTiger is an independent digital lending marketplace operated by Gatimaan Finance Advisors.