Unredeemed gift cards in India: whose money
A gift card is cash a customer handed over for goods you have not yet shipped. Here is who regulates that money in India, when you may recognise it as income, and the one widely repeated claim about unclaimed balances that turns out to be false.
- Clause 2.1 of the RBI Master Directions on Prepaid Payment Instruments puts a closed system card, redeemable only against the issuer's own goods, outside RBI regulation and supervision entirely.
- That also means the one year minimum validity in clause 13.1 does not bind your card. No RBI rule mandates an expiry period for a single-brand gift card, so the constraint has to come from your own contract terms.
- We found no CCPA order and no reported Indian consumer commission decision squarely on gift card expiry. The exposure under sections 2(46) and 2(47) of the Consumer Protection Act, 2019 is real but untested.
- India has no escheat or unclaimed property regime that reaches gift card balances. The Supreme Court decision in T.V. Sundaram Iyengar is the live risk instead, because a write-back is taxable business income.
Selling gift cards into the festive window takes cash today against goods you may ship in March, or never. Four bodies of Indian law speak to that balance, and three say less than founders expect.
A gift card is not a loyalty point. Points are a deferred discount you fund yourself, which is why loyalty points liability and breakage economics reads as a marketing model. A gift card was bought with cash, so it carries payments regulation and consumer law instead.
Start with the regulator you probably do not have
Clause 2.1 of the Master Directions on Prepaid Payment Instruments, issued 27 August 2021 and updated through 30 September 2026, defines a Closed System PPI as an instrument issued by an entity for facilitating purchase of goods and services from that entity only, permitting no cash withdrawal and no use for third party payments. The clause then says that issuance or operation of such instruments is not classified as a payment system requiring approval or authorisation by RBI and is therefore not regulated or supervised by RBI.
So a card redeemable only against your own catalogue is a closed system instrument, outside the framework. The moment it can be spent at other merchants it becomes semi-closed, which brings authorisation, KYC tiers and escrow. Founders get this wrong both ways: some register nothing while running a multi-brand wallet, others assume they need a licence to sell a Rs 1,000 card for their own shampoo.
Which means no minimum validity applies to you
The same Master Directions carry the numbers everyone quotes. Clause 13.1 requires a minimum validity of one year from the date of last loading or reloading. Clause 13.2 requires the issuer to caution the holder at reasonable intervals during the 45 days before expiry. Clause 13.3 stops a non-bank issuer transferring an expired balance to its profit and loss account for at least three years from the expiry date.
None of those bind a closed system card, because the instrument sits outside the directions that contain them. There is no RBI expiry mandate on an own-goods card and no RBI rule on a lapsed balance. They are nonetheless the only numbers an Indian regulator has put on this, so they make a sensible voluntary benchmark. Adopting the 45 day warning in particular removes the worst fact pattern from any later dispute.
The draft that could move the line
On 22 April 2026 the RBI issued draft Prepaid Payment Instruments Directions, 2026 for comment, which closed on 22 May 2026. It is not in force, but two features matter if you are designing a programme now.
- The draft drops the formal closed system category while keeping the exemption for instruments issued by an entity other than a marketplace, so a marketplace card usable against third party sellers would need authorisation. If your site hosts other sellers, that is the line to watch.
- It removes revalidation of Gift PPIs and limits their validity to one year from the date of issuance.
Consumer law is where the real exposure sits
With the RBI out of the room, the obligation comes from contract and consumer law. The Consumer Protection Act, 2019 defines unfair trade practice in section 2(47) and unfair contract in section 2(46), which covers a term imposing an unreasonable charge, obligation or condition that puts the consumer at a disadvantage. The Central Consumer Protection Authority, established under section 10, can inquire into unfair trade practices on its own motion under section 18.
A clause that extinguishes Rs 2,000 of paid-for value on a date the customer never negotiated is the obvious candidate for that reading, and whether it would be so held is untested. We found no CCPA order and no reported Indian consumer commission decision squarely on gift card expiry or forfeiture of a paid-up balance. That absence is the honest finding, and it is not permission: the first order will be applied to whatever terms the brand had at the time.
When unspent money becomes income
Cash collected on a card is a liability until the goods go out. Paragraph B46 of Ind AS 115 governs a customer’s unexercised rights. An entity that expects to be entitled to a breakage amount recognises it in proportion to the pattern of rights exercised; one that does not recognises it only when the likelihood of the customer exercising the remaining rights becomes remote, subject to the constraint in paragraphs 56 to 58. Companies outside the Ind AS roadmap apply the older standards, where the balance stays an advance until the obligation is performed or extinguished.
The tax side is settled by the Supreme Court, not by a circular. In Commissioner of Income Tax v. T.V. Sundaram Iyengar and Sons Ltd., decided 11 September 1996, unclaimed customer credit balances that the assessee transferred to its profit and loss account were held to be taxable trading receipts, the reasoning being that the character of the receipt changed by efflux of time. Write a lapsed card balance back and expect it to be taxed as business income. The Income-tax Act, 2025 replaced the 1961 Act from 1 April 2026, so older section numbers no longer map.
The limitation argument is weaker than it is usually sold. The Limitation Act, 1963 bars the remedy on a contractual claim after three years but does not extinguish the right, so a customer losing the ability to sue is not the brand being released from the obligation.
No Indian escheat regime reaches this
Several United States jurisdictions require unredeemed gift card balances to be remitted to the state under unclaimed property statutes. India has no equivalent. Escheat and bona vacantia operate under Article 296 of the Constitution and state statutes such as the Telangana Escheats and Bona Vacantia Act, 1974, and attach to property ownerless for want of a rightful owner, classically an intestate death with no heir. A card balance has an identifiable holder and is a contractual liability of the issuer, so it is not ownerless property.
The Indian regimes absorbing unclaimed money are sectoral. Unclaimed bank deposits go to the RBI Depositor Education and Awareness Fund under section 26A of the Banking Regulation Act, 1949, and unclaimed dividends and shares to the Investor Education and Protection Fund under sections 124 and 125 of the Companies Act, 2013. Neither covers a gift card liability, so the consumer law question, not the escheat question, is what to design around. If you are also selling into the corporate gifting channel, the buyer and the holder are different people, and only one accepted your terms.