Short answer: Corporate gifts up to ₹5,000 per employee per financial year are tax-exempt as a perquisite under Income-tax Rule 3(7)(iv). Above ₹5,000, only the excess amount is taxable in the employee’s hands — the full gift isn’t taxed, just the amount over the limit.
Updated September 2026.
Are corporate gifts taxable for employees in India?
Only partially, and only above a threshold. Under Income-tax Rule 3(7)(iv), gifts (in cash or kind) up to ₹5,000 per employee per financial year are exempt as a perquisite. If the total value of gifts to one employee in a year crosses ₹5,000, the excess over ₹5,000 is added to that employee’s taxable salary — not the entire gift value.
What counts toward the ₹5,000 limit?
All gifts to the same employee in one financial year are aggregated — a Diwali hamper, a birthday gift and a work-anniversary gift from the same employer count together, not separately. If your company runs multiple gifting occasions, add up the value across the year, not per event.
Is the ₹5,000 limit per gift or per year?
Per employee, per financial year — not per individual gift. A company that gives a ₹2,000 Diwali gift and a ₹2,500 anniversary gift to the same employee in one year is still within the ₹5,000 exemption. A single ₹8,000 gift would make ₹3,000 taxable in the employee’s hands.
Does this affect what Meru Gifting recommends?
Yes — many HR teams deliberately keep the standard company-wide gift at or under ₹5,000 so it stays fully tax-free, then handle any higher-value recognition (executive tiers, retirement gifts) as a separate, clearly communicated taxable perquisite.
| Total gifts to one employee/year | Taxable amount |
|---|---|
| ₹3,000 | ₹0 (fully exempt) |
| ₹5,000 | ₹0 (fully exempt) |
| ₹7,000 | ₹2,000 taxable |
| ₹15,000 | ₹10,000 taxable |
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Does the ₹5,000 limit apply separately to client gifts?
No — Rule 3(7)(iv) is specifically an employee perquisite exemption. Gifts to clients or vendors don't carry the same personal income-tax angle for the recipient, since they aren't on your payroll; they're usually costed as a business expense instead.
Want a gift bundle that stays within the ₹5,000 limit?
WhatsApp your headcount and we'll propose combinations under ₹5,000 per employee, with a GST invoice included.
Does the ₹5,000 limit apply to cash gifts too?
Yes, the exemption under Rule 3(7)(iv) covers gifts in cash or kind, aggregated per employee per financial year.
Who pays the tax on the amount above ₹5,000?
The excess is added to the employee's taxable salary and taxed at their applicable income-tax slab rate, not paid separately by the company.
Does a GST-inclusive gift value change the ₹5,000 calculation?
The income-tax perquisite limit is generally based on the value of the gift to the employee; confirm with your CA whether GST is included in your specific case.
Can employers gross up gifts to cover the tax?
Some companies choose to gross up higher-value gifts so the employee receives the full intended value after tax — this is a company policy decision, not a legal requirement.
