Cash backs are taxable -Income Tax rules on e-wallet or UPI transactions: All you need to know

Third class news article by times now. It gives a sense to the reader that whatever you transact through UPI is taxable.

99% wrong info

Har chiz me tax sala jeye ke nhi.

ITD to Gormint:

Sir, ye cashback wala *chillar income tax ke ambit se chhuta hua hai. Ispe bhi tax wax lagwa dein kya??




Gormint:

Here’s what I understood:
If I get cash back to my bank account it becomes taxable if I get over 50k of all gifts.

No idea why you guys are worried about reward points and all, which can be converted to amazon vouchers and at its best statement credit which is still not going to your bank account unless you money rotate.

I maybe wrong, but the news article seems to be talking about money going to bank

Taxscan article. Which give correct picture and correct info about new rules . Please check.

https://www.taxscan.in/a-detailed-guide-on-appl...

https://www.desidime.com/discussions/amazon-pay...

Sec 56(2)(x)(a) covers money, 56(2)(x)(b) covers immovable properties and 56(2)(x)© covers properties other than immovable property and cash.
Reward points by themselves are not either cash or property. So as long as they remain reward points, they are outside the scope of sec 56(2). But when they are converted to Gift Vouchers, they becomes cash equivalent property as defined by RBI guidelines on Prepaid Payment Instruments, thus coming under the scope of Sec 56(2).

@Bk100, that article is clickbait type, above is the correct info(income tax rules don’t change often other than adjustment in limits most of the time).

@Seinfeld see above explanation, it is not just cash in account which comes under the definition of “gift”.

“tax mamlo ka jaankar” ho koi to sahi details ke sath post karo!
Idhar confusion jyada hai!

Total cashback/points redemption etc above Rs.50,000 per year, from all sources taken together, is fully taxable as “gift”.
The IT return Form 2 requires the assessee to provide following,
Income of the nature referred to in section 56(2)(x) which is chargeable to tax (di + dii + diii + div + dv)
d(i) Aggregate value of sum of money received without consideration
d(ii) In case immovable property is received without consideration, stamp duty value of property
d(iii) In case immovable property is received for inadequate consideration, stamp duty value of property in excess of such consideration
d(iv) In case any other property is received without consideration, fair market value of property
d(v) In case any other property is received for inadequate consideration, fair market value of property in excess of such consideration

So it is not just cash but cash+cash equivalent. Gift vouchers and other items redeemed against reward points come under d(iv). As long as it is just reward points, it has no value. But the moment it is converted to cash equivalent, it comes under scanner.

Direct Discount at the time of purchase is different as that reduces the price of the product. When Amazon gives 5% direct discount on pantry for using Amazon pay card, that is reduction is price. When it gives 5% cash back, that is Cash equivalent without consideration. Similarly, Frequent Flyer miles redeemed against flight tickets of the same airlines are discount vouchers that reduce the price of the product. However, where Frequent Flyer miles are converted to Gift vouchers, that become cash equivalent without consideration. Rebate is where there is a direct discount on the price of a product. There is no tax on rebate. Basic test of “rebate” is whether GST is applicable on the net value or the gross value. If its on net value, then it is rebate, if it is on gross value, then it is not a rebate.

Amazon GV is added to Amazon Pay and can be used as Cash for future purchases. It is treated as a form of payment and not as discount from price of the original purchase for which it is given. Amazon GV obtained through 3rd party redemption are also freely transferable just like cash and can be used by anyone. So it is Cash Equivalent received without consideration. Cashbacks are not rebate, except in situations where the cashback is credited immediately to the same card account on completion of transaction. Conversion of reward points into 3rd party GV is also not rebate. Same concept applies to Cashbacks received for UPI transactions.

The cashback and reward points are still a grey area in Indian tax system. However, the last six years the Indian external debt have practically doubled. So Govt is trying to get as much money as possible and CBDT is trying new sources of revenue. So they are closing all loopholes. Their systems are already well geared to link all transactions and identify unusual transactions. Rules are already there, both in the Income Tax Act/Rules and in RBI’s Prepaid Payment Instruments (PPI). Only they are not fully enforced. No additional rules are required to enforce them. Only an internal administrative decision is enough.

All Gift vouchers are covered under RBI PPI guidelines. They are modes of payment, just like cash, credit card and cheque, and definitely not discount. GST is levied on the full value of the sale, not after adjusting the value of the gift vouchers. In case of direct discount, GST is levied on the net price after discount. Irrespective of whether the gift vouchers are applied at the time of sale or earlier, they do not affect the taxable value of the sale, so they are not discounts. And the issuing authority of these gift vouchers, as defined by RBI, is different from the company which is redeeming the points, so they are definitely 3rd party instruments.

Ye tax bharne per 15Lakh jama honge kya?

Trans: we are mango people from banana republic (Republic where debts incurred by business monopolies becoming public liabiity and are compensated from my tax)

Not to warn

1.
But Why is Amazon, Paytm recently started the total cashback amount earned over last year and total cashback earned?
I think it is for tax purpose only I guess
So, here if you get cashback( not discount) with more than 50k in a year from a single platform. It will be treated as amazon gave a gift of 50k to you as you did lot of transaction with them and then 50k will be taxable.

2.
So sending money from one account to another account is not taxable (self / blood relation) but for others if more than 50k then it will be treated as gift and gift are taxable as per income tax. However, you can prove that it was for trade/ booking/ buying a product in behalf of him but that very difficult to proof. (A live person cannot proof if he is alive)