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shekhar (Individual)     29 December 2009

Accounts Query

(a) Debit card cash back Rs.250/- is credited to my bank a/c. Please let me know what entry should i pass in books of a/c. Is it taxable under income from other sources?


 9 Replies


 ya its very much taxable under the head Income from Other Sources

Asha Pole (Legal)     29 December 2009

The entry in your books of accounts would be- Bank a/c dr 250 to Miscellaneous Income Cr 250. Since the amount is small. If the amount was huge, you could have given a credit to the respective expense account proportinately.

Vineet (Director)     29 December 2009

Cash back is not in the nature of discount and therefore cannot be adjsted against expenses. It is very much in the nature of misc income and taxable under income from other sources.

Sakeer (Article Assistend)     29 December 2009

whether penal interest paid to bank can be Dissallowed by the assessing officer? If yes how it is possible? if no pls let me know the case laws


ANAND KRISHNA NEMA (ADVOCATE)     29 December 2009

This certainly is an income from other source being different than the professional or business income. The right head for taxation is OTHER SOURCE.

It has directly credited in capital account.


The reply to the following question :

Whether penal interest paid to bank can be Dissallowed by the assessing officer? If yes how it is possible? if no pls let me know the case laws

Penal interest is alike interest on interest due but not

paid. Since you are supposed to pay interest for the

loan amount but; if not paid; than terms of loan force

you to pay additional interest.


Penal interest is additional interest. Additional interest

is paid by the firm only when they are short of funds. If

they are short of funds but requires payment then

either they have to take more funds as loan to pay


Ultimately now interest would be paid to the new party

whose interest rate may be high.


Rate of interest also depends upon the creditworthiness

of the person. Now-a-days; banks give huge loans to

companies @ 10-11% but charging 18-22% for personal


So penal interest is nothing but an additional intrest and

thus allowable since funds are being used ifor the

purpose of business.

CA Pradeep Jain (Director)     03 January 2010

it is not income if it reverted to ractify to earlier wrong charges, than Cr to capital a/c

it is other source income if given under some promotional scheme, tahn Cr. to income a/c

Vineet (Director)     04 January 2010

Dear Mr Sakeer, Penal interest is after all interest and cannot be disallowed at all.


It is an additional financial burden which is charged when the business is not able to meet its promised financial commitments. It is certainly a business necessity and hence allowable as deduction.

Ravi Kumar (Lawyer)     25 March 2010

It will be treated as taxable income and comes within the ambit of "income from other sources"

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