Mumbai: ‘Diwali bonus’ the words conjure up memories of new clothes, buying a household durable, some gold and lots of mithai and crackers.
Through the years, and with the entry of MNCs (multi-national companies) and an international work culture the emphasis on Diwali bonus has lessened and year-end appraisal driven bonus has increased. Nonetheless, many corporates do give the traditional Diwali bonus.
Emmay HR Services Limited Executive Director Sunjay Shetty said, “The companies where Diwali bonus still rules could be MNC's or large Indian corporates, medium size organizations, SME sector and definitely the small scale sector. Also a lot of companies sometimes opt to give a Diwali gift to its employees either in place of bonus or along with the bonus.”
So India still thrives on a substantial Diwali bonus culture. “The overall quantum of bonus is usually determined by the performance of the company. The quantum of bonus an individual receives is usually a function of his/her own performance and can sometimes take the form of a percentage of salary. For example, if your performance rating is ‘A’, you may get 30 per cent of CTC (cost to company or your gross take home salary) as bonus if you get a ‘B’, you may get 20 per cent of CTC as bonus and so on”, says Sonal Agarwal, CEO Accord Group India.
So what do you do with the Diwali bonanza? Blow it up? Put it in a Fixed Deposit? Or simply keep it in the cupboard?
Three ways to make your bonus stay with you for a long time:
However, the joy of Diwali is still very strong. With so many great offers on consumer durables and household products it makes sense to buy at Diwali time.
Of course there are some necessary purchases…crackers, clothes and sweetmeats.
Do spend and enjoy Diwali but take care not to burn up the entire bonus. There's a lot more you can do with it.
Investment for the wiseDiwali bonus means you have a lumpsum amount at hand. It is not often that one has a lumpsum to invest. Go and buy a single premium policy or invest some amount in a high growth mutual fund. Financial Planner Gaurav Mashruwala said, “Majority of individuals blow up their bonus. They feel it is free cash they have got. However, according to me best is to save entire bonus. If that is not possible then make a compromise. Also if you have outstanding loans, pay that first.”
So be wise and invest some part of it.
Tax planning for DiwaliFirst and foremost, remember, your Diwali bonus is taxable. Bonus is taxable in the year of receipt if it has not been taxed earlier on due basis. It forms part of ‘income from salaries’ in tax computation/ statement of income. So do account for it in your taxable income.
It will also make sense to put away some of the bonus into tax saving instruments. It will help you start your tax planning early so that you do not make rushed and imprudent decisions at the year-end.
(The author, Shalini Amarmani, is a freelancer)
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