Short answer: Employee gifts up to ₹5,000 per employee per financial year are tax-exempt under Income-tax Rule 3(7)(iv); the excess is taxable. GST input tax credit on gifts is blocked under Section 17(5)(h) of the CGST Act. Meru Gifting issues GST invoices on every order so your accounting stays clean; confirm treatment with your CA.
Updated September 2026.
Are business gifts tax-deductible in India?
Gifts to employees are tax-free in the employee's hands up to ₹5,000 per employee per financial year (Income-tax Rule 3(7)(iv)); anything above that amount is added to the employee's taxable perquisite value. Gifts to clients and business associates are typically claimed by the company as a business promotion expense, subject to the usual scrutiny that applies to any marketing spend. This is a general position, not tax advice — always confirm treatment with your CA before finalising budgets.
Can I claim GST input tax credit on corporate gifts?
No. GST input tax credit on goods given away as gifts is blocked under Section 17(5)(h) of the CGST Act. This applies even though the vendor charges GST and issues a valid tax invoice on the sale to you. Meru Gifting is GST-registered and issues a proper GST invoice for every order so your books stay accurate, even though the ITC on the gift itself cannot be claimed.
PU Diary with Gold Trim and Magnetic Clasp₹450 · MOQ 50 branded
Stainless Steel Bottle with Strap 1000 ml₹350 · MOQ 50 branded
Bamboo and Cork Notebook with Elastic Band₹250 · MOQ 50 branded
Mini Capsule Pocket Umbrella₹550 · MOQ 50 branded
What happens if an employee gift crosses ₹50,000 in a year?
Gifts to an employee that exceed ₹50,000 in aggregate value in a financial year are treated as a taxable "supply" under GST law, separate from the income-tax perquisite treatment on the ₹5,000 threshold. Most corporate gifting programmes — festival hampers, joining kits, milestone gifts — stay well under this figure per employee, but leadership or long-service awards with high-value artisanal pieces can approach it. Track cumulative gift value per employee across the year if your programme includes premium tiers.
Do I need a PO and GST invoice for every corporate gift order?
Yes, for any order your finance or procurement team will reconcile later. Meru Gifting handles PO-based ordering and issues GST invoices as standard — this is separate from whether ITC can be claimed, and keeps your accounting audit-ready regardless of the tax treatment.
- Confirm your budget per recipient and check it against the ₹5,000 (employee) exemption threshold.
- Raise a PO with Meru Gifting; we confirm pricing, MOQ (50 for branded items) and timelines.
- We deliver with a GST invoice attached to the order.
- Your finance team books the expense; ITC on the gift itself is not claimed per Section 17(5)(h).
- Confirm final tax treatment with your CA, especially near the ₹5,000 and ₹50,000 thresholds.
Do client gifts follow the same tax rules as employee gifts?
No. The ₹5,000 perquisite exemption is specific to employees under the Income-tax Act. Gifts to clients and business associates don't carry that specific exemption — they are usually treated as a business promotion or marketing expense, and the ITC-blocking rule under Section 17(5)(h) still applies to the GST paid on the gift. This is why many buyers separate their employee-gifting budget from their client-gifting budget when planning tax treatment with their CA.
| Question | Employee gifts | Client / business gifts |
|---|---|---|
| Income-tax exemption | ₹5,000/employee/FY tax-free (Rule 3(7)(iv)) | No equivalent per-person exemption |
| GST ITC | Blocked (Sec 17(5)(h)) | Blocked (Sec 17(5)(h)) |
| GST invoice needed | Yes | Yes |
| Treated as supply if | Value exceeds ₹50,000/employee/year | Not applicable in the same way |
Where can I get a GST invoice for a corporate gift order?
Every Meru Gifting order — branded bulk or artisanal — comes with a GST invoice from a GST-registered, GeM-listed vendor. See how to order for the PO process, or WhatsApp us your requirement.
Planning a gifting budget and need the numbers upfront?
We'll share pricing with GST clearly broken out so your finance team can plan ahead.
Is the ₹5,000 gift exemption per gift or per year?
Per employee per financial year, cumulative across all gifts given in that year, not per individual gift.
Can a company claim GST input credit on Diwali gifts?
No. GST paid on gifts is blocked from input tax credit under Section 17(5)(h) of the CGST Act, regardless of the occasion.
Does Meru Gifting provide GST invoices?
Yes, on every order. We are GST-registered and a GeM (Government e-Marketplace) vendor.
Are gifts to clients tax-deductible as a business expense?
Generally treated as a business promotion expense subject to normal scrutiny; there is no employee-style per-person exemption. Confirm with your CA.
