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Purchase of gift vouchers for employees by using self cheque

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R.Balu

Accountant

27 Points Posted on 31 December 2014

Dear friends,

Please provide your valuable suggessions on the follwoing.

Gift vouchers(earch voucher worth rs. 500) for employees purchased by company through cash for Rs.50000. For this purpose a self cheque has been drawn to pay that cash Rs 50000.

Does it cover u/s 40 A(3) of Income Tax?

Shall I add this gift voucher amount( each amount is below exempted limit of rs. 5000) to the salaries of the employee in their salaries structures?

Replies (1)

Vishal Goel

Chartered Accountant

1725 Points Posted on 28 February 2015

hello,

Gift to employee by an employer is taxable under the head of “Salary” if its value exceeds Rs 5000 during the financial year. Under this provision of gift of any kind is taxable under the head income from salary including voucher & token. Value of gift in excess of Rs 5000 will be treated as perquisite & taxable in the hands of employee.

While deducting TDS from employee’s salary the employer need to consider the excess amount as part of salary. If its value is less than or equal to Rs 5000 then such amount will not taxable. Provision of section 56(2) related to gift will not be applicable to employee if such gift are received from the employer.