Gifts over Rs 50,000 from your boss will now be taxed

An amendment to the Finance Bill -- the Finance Bill 2017 -- has created a provision to tax gifts received by employees from their companies, thus widening the scope Section 56 of the Income Tax Act, according to a report in The Hindu. 

The report quoted Hasmukh Adhia saying,

Hasmukh Adhia Revenue Secretary

There was a constant need to update the provisions of the Income Tax Act to avoid people from finding ways to bypass and evade tax.
 

The amendment notes that any gift received by a person from his/ her employer that is worth over Rs 50,000 will be subject to taxation. So far, the provision taxed gifts over Rs 50,000 but those received from the companies were not under the provision, the report said.

The Act, however, will not consider gifts received from close family or on occasions like weddings, inheritance, as subject to tax. Non-cash gifts given out by employers as bonuses will also be taxed now. 

A Surat diamond merchant Savji Dholakia of Krishna Exporters has made news several times by doling out expensive gifts to his employees at a time when companies are either cutting bonuses or giving puny appraisals. Last week, he announced that he will be giving 1,200 of his employees Datsun Redi-Gos as a New Year bonus gift. These cars would to go employees who did not get any incentives in 2016. 

In October last year, Dholakia announced that his company will give 1,260 cars, 400 flats and pices of jewellery to his employees from Diwali. 

After the Finance Bill was amended in the Budget, such gifts would now attract a tax.