Did you know that tax deductions don’t apply for the incentives and bonus you get from your employer? No matter what sort of bonus income you get, based on performance, sales, or ratings, they are fully taxable. Cash prizes, gifts, and the money you win from the lottery also come under the same category.
A gift of up to Rs.5,000 can get a tax exemption. Contributions beyond this amount are considered as taxable income. Even if it is given as a gift, any payment received from the employer is still reported as ‘income from salary’.
Any money you receive as a bonus from the employer will be mentioned in Form 16. When you file income tax returns (ITR), these details must be included.
A cash prize or money won from the lottery is categorised as ‘income from other sources’ and are taxed at 30% with an additional cess of 4%, equating to a total of 31.2%.
Income from entertainment programmes on media, game show, gambling, races, and betting gets similar taxation.
Any income type from these categories cannot get any deductions under Section 80C or 80D. Similarly, the basic exemption limit or income tax slabs do not apply to such income.
Therefore, the payer will deduct the applicable taxes before making the payment. If the prize is in kind, the receiver is supposed to pay an amount based on the estimated value of the award.