Refund on Subscription Plan and its effect wrt tax laws

910 votes

No thats the invitation to offer to the students that those who are unable to crack the exam get the fee refund...
It is a type of marketing policy to grab more and more students but in this case you get loss my dear

Advocate Sanjeev LawRato

678 votes

Dear Client,

Tax is a charge on your "earnings" and therefore anything that you have not earned, refunded, spent as expenses in business, etc. will get deducted. Moreover, in your books of accounts, when you return the money, an entry reflecting return of such money will come, and the tax will be calculated on the figure so derived.
So any amount so returned/ refunded will not be a part of your turnover and hence not taxable.
Best regards,

Advocate Kawaljit Singh Bhatia LawRato

764 votes

Hi..

As I understand from your brief, you run a website providing study material for IIT-JEE and other engineering exams and you want to introduce a refund scheme such that whoever is not able to crack the exam will be eligible to a 100% refund of the payment.

Please note, that providing a refund will not violate any tax liability/law. Providing refund would in fact absolve you from your tax liability with respect to such initial payment made by the student which is eventually refunded. Such a scheme is used across industry sectors and is thus legally sound.

The only responsibility is that of your accounts personnel/CA to capture the refund properly in the account books and tax papers so as to protect you from tax liability over such an amount.

Hope the above is helpful.

Advocate Tushar A John LawRato