Meet Arvind Gupta, a 21-year old research analyst working for a foreign bank in Mumbai. Arvind recently landed a Diwali bonus of Rs 10,000 from his company. And the money is gone even before Diwali is here. He spent some of it to pay off his mobile phone bills and the rest vanished when he went partying with his friends.
Arvind is not alone. 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.
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? Moneycontrol.com suggests three ways to make your bonus stay with you for a long time.
i. Spend but don't splurge
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.
ii. Investments for the wise
Diwali 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. 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.
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.
The author, Shalini Amarmani, is a freelancer.
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