Credit Card Reward Points

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This discussion explores whether redeemed credit card reward points, whether cashed out or used for products, are considered taxable income. Generally, reward points are viewed as a discount on purchases, not income, and therefore not taxable. While a US court ruling supports this, it's important to note that if rewards are received as cashback and exceed certain thresholds, they might be treated as a taxable gift.

H Thakar

H Thakar (Querist)

26 September 2021 I have redeemed by Credit card rewards points in FY 20-21 and the same has been adjusted against my credit card outstanding. I want to know whether amount redeemed will be considered income under Income from Other Sources and will be taxed accordingly?

What if instead of encashing I redeemed the reward point for some product (like phone, and other items as per their product catalogue).

Every thing will be used for personal use only.

Please advice

CA R SEETHARAMAN

CA R SEETHARAMAN (Expert)

26 September 2021 In general, credit card rewards are considered a discount on a purchase rather than income, so they're not taxable.

CA Raj Doshi

CA Raj Doshi (Expert)

26 September 2021 This is a recent US Court judgement. But very relevant to your case. According to me there wouldn't be any tax implications if you encash or buy products. https://www.taxmann.com/post/blog/6728/redemption-of-credit-card-reward-points-is-a-taxable-income-us-court/

Dhirajlal Rambhia

Dhirajlal Rambhia (Expert)

30 September 2021 If the benefits are given in the form of cashback during purchase of any accessories, it is not taxable, but adjusted against price of the product.
But if received as cashback, the same will be regarded as gift (from non relative) and hence taxable in case receipts are more than Rs.50,000/- PA.

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