Summary of this article
Treat yourself moderately, avoid wasting entire Diwali bonus on wants.
Clear loans or credit card debt to reduce financial burden.
Invest or save portion for emergencies, future goals, planned expenses.
By Chakrivardhan Kuppala, Cofounder & Executive Director, Prime Wealth Finserv Pvt Ltd.
The long-awaited Diwali bonus comes in the paychecks of millions of Indian workers every October or November. There are instances when it's a one-time payment and times when it's called a puja bonus. In government jobs, it might be a Productivity-Linked Bonus or an adjustment to the allowance. This bonus is one of the biggest amounts of money that many families earn each year, even though it may be required by law or the standard.
What are you going to do with it? That's the most crucial thing to ask.
This question is more important than ever in 2025. The Diwali bonus is now at the intersection of happiness and generating money, with record levels of holiday spending and investing options that are easier to get than ever. This article speaks about how bonuses are utilised, what the data says, and how to make smart decisions about how to spend yours.
What is the Diwali Bonus?
Some rules cover the Diwali bonus, so it's not just a cultural thing. The Payment of Bonus Act of 1965 says that workers who make up to Rs 21,000 a month can obtain an 8.33 per cent to 20 per cent bonus on their yearly income, depending on how well the company does. You must pay this legal incentive within eight months after the end of the fiscal year.
Many firms, especially those in industry, the public sector (PSUs), and traditional businesses, also give a puja bonus around the time of Diwali. Employers can use this to lower the amount of the incentive that is needed, according to the law.
For instance, Tamil Nadu granted certain PSU workers a 20 per cent bonus this year, and the national government gave PLBs and allowances to anyone who met specific requirements. Even though these payments are given in different ways, they all help families get more money in the short term.
A Quick Look at Where the Bonus Will Go in 2025
According to a LocalCircles poll, urban households would spend Rs 2.19 lakh crore over the 2025 holiday season, which is 18 per cent more than they did the year before. More over half of the people who answered said they were intending to spend more than Rs 10,000 on gifts, technology, or things for the house.
The JioStar Festive Sentiment Survey says that 92 per cent of people would either keep spending the same amount or spend more this year. The most popular categories are clothes, electronics, makeup, and travel.
The Association of Mutual Funds in India (AMFI) claimed that in July and August 2025, equities mutual funds received more than Rs 33,000 crore per month. In August, SIP contributions alone totalled Rs 28,265 crore. These aren't only Diwali inflows; the pattern shows that more and more investors are putting a lot of money into the markets that are linked to bonuses.
This season, gold prices in Gujarat hit Rs 1.21 lakh or above per 10 grams, but there is still a lot of demand, notably for coins, modest jewellery, and gold ETFs. So, the division is clear. A lot of Indians still use their Diwali bonuses to celebrate and give gifts, but a lot of them also use the money to pay off debts and invest.
What Should You Do With Your Own Cash?
It all depends on how much money you have right now and what you want to do with it in the future. This is a better way to use your Diwali bonus.
1. Don't Just Toss Away Cash
You can think of a bonus as "free money" and use it to buy things you don't need. It's OK to celebrate and treat yourself, especially during Diwali, but sometimes spending too much is a waste of time.
Your bonus isn't a lottery. You should arrange your money as if it were your own. It's a good idea to know how much money you want to spend or save before you do either. It's better to split the money 50/50 than to let it all go to waste on items you don't need.
2. Pay Off Debts With High Interest Rates Initially
You could choose to use your bonus to pay off any personal loans or credit card debt you have. The interest rates on these debts are usually between 24 per cent and 36 per cent, which means that whatever money you make by investing it is gone.
Paying off your debts with your Diwali bonus is one of the best things you can do, even if it means purchasing fewer gifts this year.
3. Add Extra Money to Your Emergency Fund
Holidays may be hard on your wallet. If you just utilised any of your emergency funds or haven't built one up at all, now is a great time to use some of your bonuses.
Your emergency fund should be enough to last you for three to six months, and you should be able to maintain it in cash or a savings account. Look at it as a strategy to protect your money.
4. Use the Bonus to Invest More or Start New Investments
If you have enough money to pay your bills and satisfy your basic needs, utilise your windfall to start or add to SIPs in mutual funds.
If you prefer gold, you may buy gold ETFs or sovereign gold bonds. You can get a tax break under Section 80C if you deposit money into an ELSS fund. Put all your money in at once if you think the market is fairly priced and you can handle the risk.
Many salaried investors use their Diwali bonuses to make up for goals they couldn't attain during the year because they didn't have enough money to invest.
5. Make Plans for Big Expenses Ahead of Time
Many individuals use incentives to acquire things they don't need, such as phones, TVs, furniture, or trips. Don't spend the bonus right away; instead, use it as part of a planned buying cycle. If you know you'll need to buy a new appliance, pay for your child's school, or go on a trip in the next three to six months, don't spend your windfall all at once.
Final Thoughts
To put it simply, your Diwali bonus is a chance. Not just to celebrate the holiday, but also to get your finances back on track. Smart families are figuring out how to use this money wisely: they spend some of it and save or invest the rest.
This season, think about these important questions: Am I spending this money on something I want or something I'll wish I hadn't?
(Disclaimer: Views expressed are the author's own, and Outlook Money does not necessarily subscribe to them. Outlook Money shall not be responsible for any damage caused to any person/organisation directly or indirectly.)
