A cash bonus is salary
A Diwali bonus, festival bonus or performance bonus is part of your salary. It's taxed at your slab rate in the year you receive it, under both regimes. Your employer deducts TDS on it, often in the month it's paid, so that month's take-home can be lower than you expect.
The ₹12 lakh trap
Under the new regime, taxable income up to ₹12 lakh carries no tax because of the 87A rebate. With the ₹75,000 standard deduction, that's a salary of ₹12.75 lakh. A bonus that takes you past that line can cost you almost all of it:
| Bonus, on a ₹12.75 lakh salary | Tax you now pay |
|---|---|
| ₹10,000 | ₹10,400 |
| ₹25,000 | ₹26,000 |
| ₹50,000 | ₹52,000 |
| ₹1,00,000 | ₹78,000 |
Tax includes the 4% cess. Marginal relief stops the tax going above the income you earned over ₹12 lakh, which is why smaller bonuses are taxed at about 104%. Further from the line, it's simpler: on an ₹18 lakh salary, a ₹1 lakh bonus costs ₹20,800, and on ₹30 lakh it costs ₹31,200.
If you're just under the line, ask whether part of the bonus can go into your employer's NPS contribution, which the new regime allows as a deduction up to 14% of basic pay. Work out the numbers before you ask.
Gifts and vouchers from your employer
From tax year 2026-27, the Income-tax Rules, 2026 value gifts, vouchers and tokens from your employer at nil if their total for the year is below ₹15,000. The earlier limit was ₹5,000. It applies under both regimes.
- A ₹10,000 voucher and a ₹4,000 hamper: ₹14,000 in the year, so tax-free.
- Add a ₹2,000 gift later in the year: the total is ₹16,000, no longer below ₹15,000. The rule doesn't say only the excess is taxed, so expect the full value to be added to your salary.
- Cash, or a gift you can use like cash, is a bonus, not a gift. It's taxed in full.
Check your payslip
Gifts above the limit appear as a perquisite in your payslip and in Form 130 (earlier Form 16). If your employer has counted a gift that's below the limit, or missed TDS on a bonus, ask HR to correct it before the year ends.
Common questions
Is a Diwali bonus taxable?
Yes. A cash bonus is part of your salary and is taxed at your slab rate, under both regimes. Your employer deducts TDS on it.
Are gifts from my employer taxable in 2026-27?
Gifts, vouchers and tokens are tax-free if their total for the year is below ₹15,000. If the total reaches ₹15,000, expect the full value to be taxed as salary. Cash gifts are always taxed.
What was the old limit for employer gifts?
₹5,000 a year, until FY 2025-26. The Income-tax Rules, 2026 raised it to ₹15,000 from 1 April 2026.
Why does a bonus near ₹12.75 lakh cost so much tax?
Crossing the ₹12 lakh rebate line makes tax payable. Marginal relief limits it to the income above ₹12 lakh, so a ₹25,000 bonus on a ₹12.75 lakh salary costs ₹26,000 with cess.
Two ways to sort this
Do it yourself
- Add the bonus to your yearly salary and see where you land in the income tax calculator.
- If the bonus takes you just past ₹12.75 lakh, ask HR whether part of it can go into your employer's NPS contribution.
- Keep a note of every gift and voucher from your employer this year. Tax-free only while the total stays below ₹15,000.
- Check your payslip and Form 130 for the bonus and any gift perquisite before you file.
Let an expert do it
We check whether your bonus has tipped you over the rebate line and find the cleanest way to cut the tax.
The first chat is freeWork it out for yourself
- Salary in hand: Turn your CTC into the amount that reaches your bank.
- Income tax: old vs new: Which regime leaves more in your account.
- Salary hike: Your new salary and take-home after a raise.
See your take-home pay in the month the bonus lands.
Open the salary calculatorSources
- Income-tax Rules, 2026, rule 15: valuation of perquisites (G.S.R. 198(E), 20 March 2026), Income Tax Department e-filing portal
- Tax rules for salaried individuals, AY 2026-27, Income Tax Department
This guide explains the rules in general. For your own situation, .