Demystifying Cashback and Tax Implications

Understanding Cashback Types: Instant cashback reduces transaction costs upfront, while deferred cashback offers rewards for future purchases. Tax Treatment for Businesses: Businesses can either adjust cashback as a purchase cost deduction or report it as additional income, impacting tax liability.

Capital Expense Considerations: Cashback on capital goods purchases allows for depreciation claims, influencing asset valuation and tax planning. Personal Cashback Taxation: Cashback on personal expenses is considered a gift; amounts exceeding INR 50,000 annually are taxable under "Income from Other Sources."

Tax Calculation Example: Illustrating how cashback exceeding INR 50,000 in a fiscal year becomes taxable income at slab rates. Compliance and Reporting: Individuals and businesses must accurately report cashback income to ensure compliance with tax regulations.

Financial Planning Implications: Awareness of cashback tax implications aids in informed decision-making for both personal and business expenditures.