FESTIVE season is here again.
And it is that time of the year when you would normally expect a sudden spike in your bank balance, thanks to a fat bonus from your company. Well, this year may be different. The slowdown has ensured that your company might not splurge this diwali (read: not give away a fat sum as bonus)!
Nonetheless, if you get a neat little sum as diwali bonus, what do you intend to do? Blow it up? Put it in a Fixed Deposit? Or simply keep it in the cupboard?
Certified financial planner Gaurav Mashruwala, finds that the majority of people blow up their bonus. "They feel it is free cash they have got," he says. Through the years, and with the entry of multinational companies and an international work culture, the emphasis on Diwali bonus has lessened and year end appraisal driven bonus has increased. Nonetheless, a large part of India still thrives on a substantial Diwali bonus culture.
wealth suggests three ways to make your bonus stay with you for a long time.
i. Spend but don't splurgeEarlier, Diwali was a time for big household purchases. To top that, money was spent on holidaying. Today, shopping has become an all round the year recreational activity. If you need a washing machine you will not wait till Dhanteras to buy it.
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 like 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.
See video: My monthly expenses double in Diwali!
ii. Investments for the wise
Diwali bonus means you have a lump sum amount at hand. It is not often that one has a lump sum to invest. You can invest the money in good quality stocks or in high growth mutual funds. Mashruwala advices, "According to me, it's best to save the entire bonus. If that is not possible then make a compromise. Also if you have outstanding loans, pay that first."
Be wise and invest some part of it.
Read: Investing in equities
iii. Tax planning for Diwali
Your Diwali bonus is taxable. Basically, your 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 end of the year.
Read: Section 80 C tax saving instruments
The author, Shalini Amarmani, is a freelancer.
Photograph: Charley Gallay/Getty Images
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