With the Income Tax Rules, 2026, several changes to the taxation of salary perquisites and allowances have taken effect from 1 April 2026.
One of the key changes for salaried employees is the increase in the annual tax-free limit for employer-provided gifts, vouchers and tokens from ₹5,000 to ₹15,000.
But how does the new ₹15,000 limit work? What types of gifts and vouchers qualify? Here’s what salaried need to know.
What has changed with the ₹15,000 tax-free limit?
Arvind Prabhakar, CEO and Co-founder of GyFTR, explained that “the exemption threshold for employer-provided gifts and vouchers has increased from ₹5,000 to ₹15,000 in aggregate during the year under both the old and new tax regimes”.
This means that the ₹15,000 limit applies to gifts received from 1 April 2026 to 31 March 2027. He said this makes non-cash rewards more attractive for employers and employees, particularly as digital gifting becomes mainstream.
What gifts and vouchers qualify?
The provision covers , vouchers and tokens, subject to applicable tax rules. Digital gift cards and shopping vouchers are particularly relevant because they offer employees choice and convenience, he noted.
On the other hand, gifts in cash or convertible to money (like a gift cheque) are fully taxable.
Is the ₹15,000 limit per occasion?
The ₹15,000 threshold is an aggregate annual limit per employee, rather than a separate exemption for every occasion such as Diwali, birthdays or work anniversaries, Prabhakar explained.
He added that employers should track the total value of qualifying gifts provided to an employee during the tax year.
Can vouchers replace cash bonuses?
Vouchers can be an efficient way to provide employee rewards, particularly when the objective is to offer choice and flexibility, he said.
Prabhakar mentioned that the broader shift towards digital rewards is already visible at scale.
How should employees report it in their ITR?
Prabhakar explained, “The tax treatment of employer-provided gifts and vouchers depends on the nature and value of the benefit, rather than whether it forms part of an employee’s CTC. Employers should ensure that the benefit is correctly accounted for through payroll.”
Typically, the employer determines the applicable tax treatment and reports any taxable perquisites in the employee’s Form 16, now referred to as Form 130 under the Income Tax Act, 2025. Employees should reconcile these details with their ITR while filing their tax returns, he said.
What if the gift value is ₹15,000 or more?
The Income Tax Rules, 2026 state that the value of a gift, voucher or token will be considered “nil” if its aggregate value is below ₹15,000 during the tax year.
Prabhakar noted that the wording specifically refers to the value being “below ₹15,000” for nil valuation.
Therefore, employees should be cautious when the aggregate value reaches or exceeds ₹15,000, rather than assuming that only the amount above ₹15,000 will be taxable.
Disclaimer: This is only for informational and educational purposes. Please consult a qualified expert for the latest laws and regulations.