How Are Gold Coin Bonuses Taxed for Employees and Can They Minimize the Impact?

If the company decides to give gold coins to its select employees as part of a bonus or appreciation drive, then who would be taxed - the employee or the company? For example, Mr. X, for his good performance, is awarded 4 gold coins of 99.9% purity from HDFC Bank.

Now, if Mr. X decides not to sell the gold coins or convert them into jewelry, would the receipt of gold coins be taxed in his gross income from a tax point of view? If so, at what rate?

Taxation of Appreciation or Loyalty Bonus

Additionally, how would an appreciation or loyalty bonus be taxed for the employee, and how can they minimize the tax impact?

Please respond.

Much obliged,

Roshini Arya

If an employee shows that they received the gift from the company, then he/she can avail of the tax-free benefits if it is below ₹50,000; above ₹50,000 counts as taxable income. In the future, when he or she sells the gold, it will be considered a capital gain or loss, and the capital of the previous year will be counted based on the index number.

If an employee received gold against his bonus amount, then there are no questions; gold is equal to the bonus amount. Please confirm this with a finance/accounts expert.

Thank you,

Ashish

If an employee receives gifts from the management (e.g., Diwali gifts, New Year gifts, etc.), it is tax-exempt as per the Income Tax Act.

Regards,
Srini

Many thanks for your response. I just have an addition to be made. As you have correctly mentioned, a gift up to 50K is not taxable. Can the company, as per law, give a gift to the spouse of the employee or parent?

Gift Distribution to Family Members

XYZ Ltd wants to give a gift of Rs 150,000 to employee Mr. A for his good performance. Mr. A is an employee of XYZ Corp and receives a gift of Rs 50,000, which is tax-exempt. The wife of Mr. A, Mrs. A, is given a gift of Rs 50,000 (she is a housewife with no income and files NIL returns). Additionally, the parents of Mr. A are given a gift of Rs 50,000 (parents are senior citizens and also file NIL returns).

Will the tax authority have an issue with this? What will be the positive and negative aspects for the company XYZ Ltd? Please clarify, and I shall be much obliged.

Regards,
Roshini