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Tuesday, November 8, 2016

Cash Back is Black Corruption?

Can Cash Back schemes create black money and encourage corruption?

Cash Back ! Cash Back ! Cash Back !  Today everybody is attracted towards cash back and looks for goods and services offering Cash Back. For example, if any Government of Corporate employee is to travel from New Delhi, the smoke capital of the world, to Bengaluru then he or she will just surf for the costliest tickets offering highest cash back as the cost of the ticket is borne by the employers and cash back is pocketed by the employees. Now I am just thinking of Cash Backs which can be seen in many contexts like:

Source of Legalised Corruption: Cash Back is a source of legalised corruption as cash backs are designed to suit the requirements of the corrupt officials. The corrupt officials are asked to create their personal wallet account with merchants selling the goods or services. Cash back is ploughed back in such wallets whereas the cost of goods and services bought through such wallets are borne by the Government or Corporate sectors. For example, if anyone is buying an ordinary air ticket of Rs.3000 at a higher cost of Rs.5000 then the airline may not only offer cash back of Rs.2000 but also allow complementary food during the stay. Don't  you smell something fishy in the transaction? Yes, it is a direct greasing of the palm by offering lucrative cash back. Higher the cash back, more the chances to attract the greedy individuals, who treat the whole transaction as an honest deal.

Creation of Black Money: Such cash backs are source of undisclosed income or say black money in the hands of reciepants of Cash Back. These cash backs are neither taxable nor added under the head "Income from other Surces". Even if cash backs is received by genuine marketers, the cash back can not be termed as "Discount" as discounts are deducted from the bills. Take the case of reimbursable medical bills paid by the genuine patients. Cash Back received by patients is source of black money which is never disclosed in IT Returns.

Miscl Cash Backs: Payment Gateways like Freecharge and PayTM allow cash backs on funding the accounts by individuals. For example, freecharge offers me 5% cash on funding my freecharge account with a maximum of Rs.50-00. I deposit Rs.1000 on 1st of every month in my freecharge wallet and get income tax free credit of Rs.50-00 in my freecharge wallet and when I use this balance to pay my bills I get another cash back, ranging from 2% to 10%, and that too exempted from income tax.

What is your opinion about Cash Backs offered by merchants selling goods and service? Are they tempting the honest tax payers to violate tax laws knowingly or unknowingly.

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