Is Income Tax Payable on Credit Card Cashback and Reward Points? Know What Experts Say:

With the growing economy, the use of credit cards and the Unified Payments Interface (UPI) is also growing. Credit cards offer several benefits, such as cashbacks, reward points, and discounts. Due to these benefits, the use of credit cards is increasing rapidly. However, several users have a common question: "Is income tax payable on credit card cashbacks?"

Whenever any transaction is performed using a credit card, the user may benefit from cashback. Some cashbacks are liable for income tax, while some are not; their taxability depends on their nature and circumstances.

As per the income tax rules, usually, credit card rewards like cashbacks and reward points are considered as discounts. These discounts can be used to purchase any other item at a reduced price. However, they are not considered a part of income. Hence, experts say that income tax is not payable on credit card rewards.

Under the Income Tax Act, there is no fixed maximum limit on credit card reward points or loyalty benefits. However, their tax treatment depends on how the rewards are used. According to the experts, if credit card reward points are converted into cash or received in connection with employment, they may be taxable, depending on the nature of the benefit.

The Income Tax Act 1961 does not cover any rewards and cashbacks earned through credit cards. Credit card rewards and cashback are benefits earned when you spend using a credit card or loyalty programme. These benefits can usually be used to get vouchers, discounts, or other offers.

Note: The article is only for informational purposes.