Diwali Shopping & Tax Benefits: What You Need To Know This Festive Season

Diwali is not just the festival of lights but also one of the biggest shopping seasons in India. From gold and electronics to sweets and clothes, festive spending sees a massive surge during this time. This year, the celebration has come with an added incentive — a reduction in goods and services tax (GST) rates since late September, which has boosted consumer sentiment. With discounts and offers pouring in, people are making the most of this opportunity. However, while festive spending continues to rise, many are also keen to understand whether their Diwali expenses can help them save on taxes.

Tax Deductions Do Not Apply To Regular Festive Shopping

According to experts, purchases made for Diwali such as clothes, sweets, gifts, or home décor are considered personal expenses under Indian tax laws. These items do not fall under any tax-exempt category, meaning that individuals cannot claim tax deductions for such festive spending. Even lavish Diwali gifts or decorations bought for personal use are not eligible for any rebate.

However, that doesn’t mean there are no tax benefits at all during this festive period. Experts note that under certain conditions, gifts and monetary transactions exchanged during Diwali may qualify for tax exemptions, provided they meet specific criteria defined under the Income Tax Act.

Understanding Tax Rules For Gifts Under Section 56

The Income Tax Act, under Section 56, provides clear guidelines on the taxation of gifts. As per this provision, any gift received in the form of cash, cheque, or draft from a relative is not subject to tax. This rule covers a wide range of family members including one’s spouse, siblings, siblings of the spouse, parents and their siblings, as well as lineal ascendants and descendants such as grandparents and children.

The exemption extends even further to include the spouses of these relatives. This broad definition ensures that most familial gifts exchanged during festive occasions like Diwali remain tax-free. Such clarity, according to experts, allows individuals to exchange gifts within families without worrying about tax implications.

Gifts From Non-Relatives May Be Taxable

While gifts from family members are exempt, those received from non-relatives come under the purview of taxation. As per the tax department, if the total value of such gifts received in a financial year exceeds ₹50,000, the entire amount becomes taxable. This rule applies not only to individuals but also to Hindu Undivided Families (HUFs).

In simpler terms, if a person receives ₹60,000 in total gifts from non-relatives during a financial year, they will have to pay tax on the full ₹60,000 — not just on the amount exceeding ₹50,000. The Income Tax Department states, “Once the aggregate value of monetary gift received during the year exceeds Rs 50,000, then the aggregate value of gift received during the year will be charged to tax.”

Corporate Gifting And Tax Implications

Corporate gifting, a common practice during Diwali, also carries tax implications. Experts explain that gifts received from an employer, such as vouchers, hampers, or gift cards, are taxable as perquisites if their value exceeds ₹5,000 in a financial year. Hence, employees receiving expensive festive gifts from companies must factor in the tax liability that may follow.

Similarly, for business owners, gifts or incentives offered to clients and partners during the festive season can be recorded as business expenses, provided they are legitimate and accounted for in business records. However, personal gifts given outside of business contexts are not deductible.

Why Awareness Matters During The Festive Season

While it’s natural to indulge during Diwali, experts emphasise that being aware of tax rules can help individuals manage their finances better. Many people overlook the implications of receiving high-value gifts or transferring money informally, which can later attract scrutiny. Staying informed ensures compliance and avoids unnecessary financial stress post-festivities.

Planning ahead, keeping receipts, and maintaining transparency in financial exchanges are good practices to follow. Moreover, consulting a qualified tax professional can help individuals understand how to manage festive finances responsibly.