Tds for loayalty bonus
This query is : Resolved
21 June 2019
Respected sir
we are in the business of promoting goods and services of others by distributing coupons .promoting the goods and service of others through discount card programme.
when any customer have balance of 500 points , they can make payment by 500 points only and no cash required.
that 500 points will be credited to freedeem cash a/c along with 5% extra .
for ex:- if customer reedeem 500 points , businessman will get 525 freedeem cash.
that can be used by businessman in two ways :-
1) they can topup their prepaid account
2) they can ask for payment from us.
i want to know whether any GST & TDS ARE APPLICABLE ON THE SAME .
PLEASE SUGGEST HOW ABOVE TRANSACTION RECORDED IN BOOKS
we are in the business of promoting goods and services of others by distributing coupons .promoting the goods and service of others through discount card programme.
when any customer have balance of 500 points , they can make payment by 500 points only and no cash required.
that 500 points will be credited to freedeem cash a/c along with 5% extra .
for ex:- if customer reedeem 500 points , businessman will get 525 freedeem cash.
that can be used by businessman in two ways :-
1) they can topup their prepaid account
2) they can ask for payment from us.
i want to know whether any GST & TDS ARE APPLICABLE ON THE SAME .
PLEASE SUGGEST HOW ABOVE TRANSACTION RECORDED IN BOOKS
23 June 2019
GST applicable but TDS not applicable on this.
Treat the payment as expenses in your books of accounts.
Treat the payment as expenses in your books of accounts.
23 June 2019
Under what expenses we should debit this payment?
23 June 2019
Freedom cash expenses. RS 25 collected will be income against which the expenses incurred.
24 June 2019
RESPECTED SIR
RS.25 WILL BE EXPENSES FOR OUR COMPANY & NOT INCOME FOR OUR COMPANY .
AS PER YOUR REPLY GST WILL BE APPLICABLE AT TIME OF TOPUP PREPAID ACCOUNT.
BUT I WANT TO KNOW WHETHER ANY GST LIABILITY AT TIME OF GIVING CREDIT TO BUSINESSMAN OF RS.525 FOR PURCHASE BY CUSTOMER FOR RS.500 ARISES ?
OR ANY TDS LIABILITY ?
RS.25 WILL BE EXPENSES FOR OUR COMPANY & NOT INCOME FOR OUR COMPANY .
AS PER YOUR REPLY GST WILL BE APPLICABLE AT TIME OF TOPUP PREPAID ACCOUNT.
BUT I WANT TO KNOW WHETHER ANY GST LIABILITY AT TIME OF GIVING CREDIT TO BUSINESSMAN OF RS.525 FOR PURCHASE BY CUSTOMER FOR RS.500 ARISES ?
OR ANY TDS LIABILITY ?
27 July 2025
Got it! Let me clarify your query about **TDS and GST on loyalty bonus (points redeemed with extra credit):**
---
### 1. **GST Applicability**
* When the customer redeems 500 points and gets 525 redeemable cash credit, the **additional 5% (i.e., 25 Rs)** is a kind of **incentive or discount** provided by you.
* GST will **generally be applicable at the time when the prepaid account is topped up or when the service/goods are actually provided**.
* The mere crediting of points (500 points + 5% extra) **does not attract GST immediately** unless it results in actual supply of goods or services.
**So:**
* No GST at the time of crediting 525 redeemable cash.
* GST is applicable **when the prepaid account is topped up or service is availed** using that credit.
---
### 2. **TDS Applicability**
* **No TDS is applicable on loyalty points or bonus credits given to customers or businessmen.**
* TDS applies on payments made for services or specified transactions under the Income Tax Act, but loyalty bonus credits are **not considered taxable payments** in the hands of the recipient.
---
### 3. **Accounting treatment**
* When you credit 525 to the businessman’s redeemable cash account, treat it as a **liability** because you owe them that amount.
* When the businessman uses this credit (tops up or redeems for cash), you can then record it as **revenue** or **expense** based on the nature of transaction.
* The Rs. 25 (extra 5%) is an expense (incentive/discount) for your company.
---
### Summary:
| Aspect | Applicability | Notes |
| -------------------- | -------------------------------------------- | --------------------------------------------------- |
| GST | Applicable when prepaid account is topped up | No GST at time of crediting points |
| TDS | Not applicable | Loyalty points/bonus not considered taxable payment |
| Accounting Treatment | Credit as liability; expense for 5% extra | Recognize revenue/expense upon redemption |
---
If you want, I can help draft journal entries or provide more detailed tax references for this. Would you like that?
---
### 1. **GST Applicability**
* When the customer redeems 500 points and gets 525 redeemable cash credit, the **additional 5% (i.e., 25 Rs)** is a kind of **incentive or discount** provided by you.
* GST will **generally be applicable at the time when the prepaid account is topped up or when the service/goods are actually provided**.
* The mere crediting of points (500 points + 5% extra) **does not attract GST immediately** unless it results in actual supply of goods or services.
**So:**
* No GST at the time of crediting 525 redeemable cash.
* GST is applicable **when the prepaid account is topped up or service is availed** using that credit.
---
### 2. **TDS Applicability**
* **No TDS is applicable on loyalty points or bonus credits given to customers or businessmen.**
* TDS applies on payments made for services or specified transactions under the Income Tax Act, but loyalty bonus credits are **not considered taxable payments** in the hands of the recipient.
---
### 3. **Accounting treatment**
* When you credit 525 to the businessman’s redeemable cash account, treat it as a **liability** because you owe them that amount.
* When the businessman uses this credit (tops up or redeems for cash), you can then record it as **revenue** or **expense** based on the nature of transaction.
* The Rs. 25 (extra 5%) is an expense (incentive/discount) for your company.
---
### Summary:
| Aspect | Applicability | Notes |
| -------------------- | -------------------------------------------- | --------------------------------------------------- |
| GST | Applicable when prepaid account is topped up | No GST at time of crediting points |
| TDS | Not applicable | Loyalty points/bonus not considered taxable payment |
| Accounting Treatment | Credit as liability; expense for 5% extra | Recognize revenue/expense upon redemption |
---
If you want, I can help draft journal entries or provide more detailed tax references for this. Would you like that?
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