Are Employee Rewards from Directors During COVID Taxable? Understanding Tax Implications

Dear All, first of all, Happy New Year to all & God bless all. Our Directors have paid rewards from their own pockets to those employees who attended the office during the Corona Pandemic. Now, my question is whether the said amount is taxable in the hands of an employee? If it is more than Rs. 50,000/-, what will be the tax treatment if it is less than Rs. 50,000/-?

Thank you.

Dear Raj Bhagwat,

Any payment made to the employee that is shown in the salary slip becomes taxable and is liable for tax deduction (TDS) by the company.

If the Directors have made personal payments not reflected in the company's accounts, it becomes a personal matter between the individuals. The company is not involved. However, the employee must disclose this income when filing their tax return. Ultimately, it is the employee's decision.

Your question regarding tax liability has been addressed. It is recommended not to pay any amount to an employee that is not reflected in the salary slip. In a formal organization, all activities should be official; there is no place for unofficial payments, regardless of the Directors' good intentions. Such actions convey the wrong message to employees.

Employees may be satisfied with receiving the money, regardless of its source. Directors may feel content for earning staff goodwill. Nonetheless, these actions undermine the company's formal structure. Maintaining a proper organizational culture requires adherence to this formal structure.

Thanks,

Dinesh Divekar