Nowadays, almost every jobbing person is using a credit card. Be it the last day of the month or any big expense, the credit card works. Even everything is fine, but if you use the credit card to run the work of friends, then you can get into trouble and can come on the radar of the Income Tax (IT) department. Let’s know why this is so?
Actually, it often happens that people help each other in friendship. For example, we book flight tickets to help the friend. Helps in online or offline shopping or pay any bill if needed. This habit can put you in trouble. This is because the help of help will return you money from UPI or bank transfer. But there is a big thing here that people ignore, that is the Income Tax Department.
Income tax department will understand ‘earning’
If you are spending your credit card again and again and friends keep returning the money, then the tax department can also see it like ‘earning’. Especially when the amount is large or such transactions are frequent. In such a situation, the Income Tax Department can ask. Why did these money come to you? Is this your income? That is, you cannot get caught in tax mess in the affair of fulfilling friendship.
Understand like this
For example, suppose that you have helped your friend to buy a smartphone of 50 thousand rupees from your own credit card. The phone bill has been paid from your card. After this, the friend gave you ₹ 50,000 transfer from UPI a few days later. Even it is fine. But if you use credit cards for a large amount in this way and take money online, then this thing can knock income tax. The Income Tax Department can understand the money received online.
What is tax rule
If in a financial year, your credit card expenses are ₹ 10 lakh or more, then the bank has to give information directly to the Income Tax Department. Similarly, if you pay a credit card bill in more than ₹ 1 lakh cash, then it can also cause doubt. Cash takes money or transferred without any record, then a penalty may be imposed on you. So do every transaction from banking channels, such as UPI, NEFT or IMPS.
How to avoid tax mess?
Chartered Accountant Neeraj Sharma says that if you use your credit card to help friends, then it is very important to take some precautions. First of all, try to keep the banking record of every transaction. Always take money from UPI, NEFT or bank transfer, avoid taking cash because the tax department may be suspicious of cash transactions. Also, avoid spending for friends repeatedly and withdrawing money from them. If this happens again and again, the department can consider it as your business activity. If the amount is big, then it would be better to create a written consent or small agreement between you and your friend. This will prove that this is just help, no money.