Is a Diwali bonus taxable?
Yes. A cash bonus from your employer is part of your salary and is taxed at your slab rate in the year you get it. There is no separate bonus tax. The tax on the bonus is simply the tax on salary + bonus minus the tax on your salary alone.
The ₹12 lakh trap in the new regime
In the new regime, income up to ₹12 lakh after the ₹75,000 standard deduction pays no tax at all, thanks to the rebate. If your salary is just under that, a bonus that pushes you over costs far more than you would expect.
On a ₹12 lakh salary, a ₹1 lakh bonus costs ₹26,000 in tax, so you keep ₹74,000. On an ₹18 lakh salary the same bonus costs only ₹20,800, because that salary is already past the cliff. Marginal relief keeps the tax from being more than the amount you crossed ₹12 lakh by, but that still takes a big bite.
Tax on a bonus at common salaries
New regime, salaried, below 60.
| Yearly salary | Tax on ₹50,000 bonus | Tax on ₹1 lakh bonus | You keep of ₹1 lakh |
|---|---|---|---|
| ₹8 lakh | ₹0 | ₹0 | ₹1,00,000 |
| ₹10 lakh | ₹0 | ₹0 | ₹1,00,000 |
| ₹12 lakh | ₹0 | ₹26,000 | ₹74,000 |
| ₹15 lakh | ₹7,800 | ₹15,600 | ₹84,400 |
| ₹18 lakh | ₹10,400 | ₹20,800 | ₹79,200 |
| ₹25 lakh | ₹15,600 | ₹31,200 | ₹68,800 |
| ₹35 lakh | ₹15,600 | ₹31,200 | ₹68,800 |
Ways to keep more of it
- Employer NPS: ask HR whether part of your pay can go into NPS. Up to 14% of basic pay in employer NPS is deductible even in the new regime.
- Old regime: if you have big deductions (home loan interest, HRA, 80C), check whether the old regime wins this year in the income tax calculator.
- Put it to work: a ₹50,000 bonus invested every Diwali for 10 years at 12% grows to about ₹9.83 lakh.
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Questions people ask
How much tax will I pay on my Diwali bonus?
It depends on your salary and regime. In the new regime, if salary plus bonus stays within ₹12.75 lakh, you pay nothing. On a ₹12 lakh salary a ₹1 lakh bonus costs ₹26,000; on ₹18 lakh it costs ₹20,800.
Why was so much TDS cut from my bonus month salary?
Employers recalculate your yearly tax when a bonus is paid and deduct the extra TDS in that month, or spread it over the remaining months. Your total tax for the year is the same either way.
Is the statutory bonus under the Payment of Bonus Act taxable?
Yes. Statutory bonus (8.33% to 20% of wages for eligible employees) is taxed as salary like any other bonus.