Gifts to Employees

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This query is : Resolved

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This discussion explores whether gifts purchased for employees from their performance, paid directly from the business account, qualify as a business expense. While generally considered a business expense, gifts exceeding £5,000 per employee per financial year are taxable as perquisites. The limit includes cash and items like gold coins. Reasonable gifts can be given to vendors and associates as sales promotion without a strict limit, provided they are sensible.

Rahul Singh

Rahul Singh (Querist)

04 March 2021 hello, in my proprietorship business (services) to some employees I allow to get stuff from Fashion, Apparel, etc. websites basically as gifts for their good performance. Payments are made directly from Current Account and bill with app/website is in business name.

Is that considered as business expense and can be shown that way? please help.

CA R SEETHARAMAN

CA R SEETHARAMAN (Expert)

05 March 2021 It will be considered as business expenses.
Gifts from an employer to employee is taxable as perquisites if their value is more than Rs 5,000. The Rs 5,000 limit is for an entire financial year.

Rahul Singh

Rahul Singh (Querist)

05 March 2021 Thanks sir for reply, but lets suppose if I order on behalf of them (e.g. clothes) and give them as gift, still it's INR 5000 per employee? Is that limit only for cash gifts? Is there any legal work around for this? Because that limit is too less. Does this limit also includes any gold coin, etc,?

And what's the limit, for gifting to vendors/resellers/associates? on occasions like Diwali, new year, etc.

CA R SEETHARAMAN

CA R SEETHARAMAN (Expert)

05 March 2021 5000 limit include all cash and gold coins. No legal work required. Reasonable gift may be given as sale promotion to vendors etc.

Rahul Singh

Rahul Singh (Querist)

05 March 2021 but sir there is no limit for gift to vendors etc., right?

CA R SEETHARAMAN

CA R SEETHARAMAN (Expert)

05 March 2021 Yes, you are right but should be reasonable.

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