Taxability of gift card

Please refer to the following judgements :

Where the assessee instead of distributing free sample of liquor for promoting its sale to the defence establishment used to reimburse the payment made by the defence establishment to the CSD stores for the purchase of liquor, the amount of such reimbursement was held to be a deductible expenditure as the same was neither against the public policy nor prohibited under the law.Refer Brihan Maharashtra Sugar Syndicate Ltd. 28 DTR 265. Again, Expenditure incurred by assessee on film production by way of advertisement for marketing of products manufactured by it was allowable as revenue expenditure, in as much as it was in respect of promoting ongoing products of assessee. Refer, Geoffrey Manners & Co. Ltd. 180 Taxman 87. Again, Expenditure on the business promotion, including gifts, samples prizes, etc. to customers including officials of CSD canteens was allowable when the gifts were below Rs 340 and not expensive. Refer CIT vs. C. B. K. R. Enterprises 37 DTR 148.

In my opinion the gift cards of banks given away as incentives to employees is an allowable expenditure as the same is a part of normal business activities. (From Company's point of view)

Now from an employee's point of view, Incentive will from part of your salary as per the Income Tax Act and hence will be taxable.

Coming to your second question, even if the gift is received in kind or as u said "no facility of cash withdrawal", it will still be taxable.

In some cases, the gift is also received from third parties (I have received query on such cases as well), in this case there will be no employer-employee relationship, but still the amount received will taxed under "Income from other sources"

Regards