Now -a- days due to the increasing awareness of digitization and rapid growth of e-commerce industry, concept of Cashback is gaining importance. Cashback is basically of two types:
- Instant Cashbacks
Such Cashbacks are applicable to the same transaction only for instance suppose there is an offer that if you book a cab through some online app riding from point A to point B then if normal fare is Rs 400 but due to offer of instant cashback of Rs 100, the amount payable at the end of the trip will be Rs 300.
- Deferred Cashback/Cashback referral
Such Cashbacks are applicable on the next transaction done for instance If you book a cab through online app and you refer your friend, you will receive cashback referral if your friend also books a cab through the same app.Now such cashback referral earned can be used when you next book your cab.
Now the Question arises that whether this cashback is your income or not?
Basically we can interpret Cashback as the discount given against any expense/purchase made. Since it reduces the cash outgo whether applicable to the same transaction or next transactions.
So In case of person doing Business, if he wants to claim these expenses in his books then expense net of instant cashback should be claimed. If in the example of instant cashback quoted above, a person want to claim the expense of cab as conveyance in books then Rs 300 should be claimed.
And in case of deferred cashback, transaction to which such cashback is applied should be claimed net of cashback.
And if you are not doing business or you are not claiming these expenses anywhere, then there is no specific accounting treatment of the cashback.