11 Aug 2025: In today’s digital age, cashback offers are everywhere – buy with a credit card and get ₹1,000 cashback. Recharge your mobile and get ₹50 back. Pay your electricity bill and get ₹200 cashback. This has now become very common. But the Income Tax Department is now keeping a close eye even on these seemingly ordinary things.
If large amounts are repeatedly coming into your bank account as cashback – like ₹2,000, ₹5,000, or ₹10,000 – the department may classify it under “Income from Other Sources.”
Cases where cashback can become taxable:
1. Heavy cashback on expensive purchases:
International travel tickets, luxury gadgets, high-end hotel bookings – cashback received on these can fall under the tax net.
2. Frequent high-value transactions:
If a person repeatedly makes high-value transactions solely to earn cashback, it can appear suspicious to the Income Tax Department.
3. Not showing it in your ITR:
If you fail to declare such cashback in your Income Tax Return (ITR), you may receive a notice from the department.
No need to worry about small cashback amounts!
If you are only getting cashback amounts like ₹50, ₹100, or ₹500, earned through regular shopping or bill payments, these are usually not taxable. They are generally treated as a “discount” or “incentive.”
True Story: A small mistake and a notice received
In 2016, Rohit Singh, an employee in a private company, received ₹2,500 cashback on a debit card transaction. He didn’t include it in his ITR because he assumed it wasn’t taxable. But a few months later, he received a notice from the Income Tax Department stating that it was “Income from Other Sources” that he failed to declare.
How to avoid a tax notice? Follow these tips:
- Keep a record of every cashback – whether small or large.
- If it’s a large amount, report it in your ITR – this ensures transparency.
- File your ITR on time – and take help from a tax consultant if needed.
- Avoid frequent cash transactions – especially if ₹10,000 or more.
- Keep track of high-value transactions via credit card/UPI.
Cashback and tax – how and why?
In today’s digital age, cashback offers are everywhere – buy with a credit card and get ₹1,000 cashback. Recharge your mobile and get ₹50 back. Pay your electricity bill and get ₹200 cashback. This has now become very common. But the Income Tax Department is keeping a close eye even on these seemingly ordinary things.
If large amounts like ₹2,000, ₹5,000, or ₹10,000 are being credited to your bank account regularly as cashback, the department can consider it as “Income from Other Sources.”
Cases where cashback can become taxable:
- Heavy cashback on expensive purchases like international travel tickets, luxury gadgets, and high-end hotel bookings.
- Frequent high-value transactions done just to get cashback, which may seem suspicious to the tax authorities.
- Not declaring such cashback in your ITR, which can lead to a notice.
No need to worry about small cashback amounts!
Small cashback amounts like ₹50, ₹100, or ₹500 from regular shopping or payments are generally treated as “discounts” or “incentives” and are not usually taxed.
A small mistake and a notice received:
In 2016, Rohit Singh, working in a private company, received ₹2,500 cashback on a debit card transaction. He didn’t add it to his ITR thinking it wasn’t taxable, but later got a notice from the Income Tax Department for not declaring it as “Income from Other Sources.”
Summary: Cashback earnings may attract income tax under certain conditions. Experts explain applicable rules and thresholds that could trigger notices from tax authorities.