Shopping rewards are not limited to instant discounts, cashback and bank reward points. Some platforms also offer rewards in the form of gold and Bitcoin, allowing consumers to accumulate small quantities of these assets against eligible purchases.
Unlike conventional cashback, however, the value of asset-linked rewards can fluctuate with market prices. Here is what consumers should know about the different types of rewards and the factors to consider before choosing them.
What are the different types of shopping rewards?
Consumers generally come across four types of shopping rewards:
- Instant discounts: Reduce the purchase price at the time of payment through seller offers or bank partnerships.
- Cashback: A fixed amount or percentage of the purchase value is returned to the consumer.
- Loyalty points: Points earned on transactions can be redeemed for discounts, vouchers or products, subject to programme conditions.
- Asset-linked rewards: Platforms offer rewards in the form of gold or Bitcoin against eligible purchases.
How do gold and Bitcoin rewards work?
Under gold-linked programmes, consumers receive small quantities of digital gold against eligible purchases. The accumulated gold can be tracked and redeemed or sold, subject to platform terms.
Bitcoin-linked programmes work similarly, with rewards credited in the form of cryptocurrency. However, their rupee value changes with Bitcoin’s market price.
Roshan Aslam, CEO and co-founder of GoSats, an Indian financial and rewards platform, said gold rewards allow consumers to accumulate small quantities of the metal through regular spending, while Bitcoin rewards provide exposure to the cryptocurrency.
What should consumers check before choosing rewards?
Aslam said consumers should compare the actual rupee value of rewards with conventional cashback before making a choice. For instance, 5% cashback on a ₹50,000 purchase amounts to ₹2,500. A reward of the same percentage in gold or Bitcoin would initially be worth the same amount, but its subsequent value could change.
Other factors to consider include:
- Redemption conditions: Check minimum withdrawal limits, expiry dates and redemption charges.
- Price differences: Check the difference between buying and selling prices, as this can affect the final redemption value.
- Market risk: Gold and Bitcoin rewards can gain or lose value. Bitcoin carries higher price volatility.
- Platform conditions: Understand how the underlying asset is held, how rewards are credited and whether withdrawals are permitted.
What are the tax implications of Bitcoin rewards?
In India, gains from the transfer of virtual digital assets (VDAs) are taxed at 30%, along with applicable surcharge and cess. Only the cost of acquisition is deductible, losses cannot be set off against other income, and 1% TDS applies to specified transfers.
The tax treatment of Bitcoin received as a shopping reward may depend on the nature of the transaction and individual circumstances.
Consumers should maintain transaction records and seek professional tax advice where required.
Cashback or asset-linked rewards: What should consumers choose?
Cashback offers a defined monetary benefit, while gold- and Bitcoin-linked rewards carry the risk of price fluctuations. The choice depends on the consumer’s preference, intended use and risk appetite.
Aslam advised consumers to avoid making purchases solely to earn rewards and to compare the actual value of the benefit before choosing a programme.