Winning Bizness Desk
Mumbai.Cashback on digital payments, online shopping, or bill payments has become a common way for people to save money or enjoy rewards. But the income tax department is now keeping a close watch on such transactions, especially when the amounts are large. If you receive a big cashback and fail to mention it in your income tax return, you could get a notice.
When cashback becomes taxable income
Under tax rules, cashback can be treated as “income from other sources” if the amount is significant. This is more likely when cashback is linked to expensive purchases such as international flight tickets, luxury hotel bookings, costly gadgets, or high-end mobile phones. People who repeatedly make big transactions only to get cashback could also fall under the tax net. Frequent large cashback deposits in your account can trigger suspicion.
Example of a surprise tax notice
Back in 2016, Rohit Singh, who worked for a private company, was shocked to get an income tax notice. The reason was a cashback of just Rs 2,500 he had received through a debit card transaction. Rohit did not consider it taxable income and left it out of his return. The department, however, treated it as “income from other sources” and issued a notice. The case shows how even a small oversight can bring a tax query.
Small cashback usually safe
Cashback of Rs 50, Rs 100, or Rs 500 earned from routine shopping or digital payments is generally not considered taxable. Such rewards are often treated as discounts or incentives. However, if the cashback is large or received repeatedly, the tax department may view it as part of your income and tax it accordingly.
How to avoid a tax notice
The simplest way to stay safe is to keep proper records of every cashback and cash transaction. If the cashback amount is large, include it in your income tax return. File your ITR on time, and avoid repeatedly depositing large cash amounts in your account without explanation.
Growing focus on non-traditional income
The move to keep cashback under watch is part of a broader effort by the income tax department to monitor unconventional sources of income. As more transactions shift online, authorities are using digital tracking tools to ensure no taxable income escapes their attention.
Story in a nutshell
1. Large cashback from online shopping or payments can be taxed.
2. Tax department treats such amounts as “income from other sources”.
3. Expensive purchases with high cashback are more likely to be targeted.
4. Repeated big cashback transactions can trigger suspicion.
5. Even Rs 2,500 cashback once caused a tax notice.
6. Small cashback from regular purchases is usually safe.
7. Keeping records and declaring big cashback in ITR can prevent trouble.
