credit card users alert
Nowadays most people use credit cards for reward points, cashback and offers. If used properly, it is a profitable deal, but if the card is used excessively or wrongly, then these benefits can turn into tax problems. The Income Tax Department is now keeping a close watch on credit card expenses.
Some people spend with friends or relatives on their credit cards to earn reward points and later withdraw the money from them., Many times money is transferred back and forth through fare, wallet load or payment app., This expenditure is visible from outside, but in reality there is no real expenditure., Tax department such transactions ,fake expenses, can assume,
Red flag if expenses exceed income
If your income tax return shows limited income, but credit card statements show expensive travel, shopping or luxury expenses, it creates an immediate alert in the system. The Income Tax Department identifies such cases through data analytics and can ask you about the source of your expenditure.
Giving cards to friends is also risky
Many people give their credit cards to friends or family to use and get cash or UPI Take money from. If there is no clear record of this money and the expenditure does not match your income, then the tax authorities may consider the entire expenditure as your personal income or may consider it as unnecessary money.
rent and HRA Sports related to can also prove costly
some salaried people HRA To avail exemption, rent is paid through credit card, especially to parents or relatives. If the actual tenancy relationship is not clear or the landlord has not shown the rent in his return, then the tax department HRA The discount may be cancelled. Besides, returning money in the name of rent also comes under suspicion.
Mismatch of business expenses and personal cards
If you pay company or business expenses using your personal credit card and later seek reimbursement, it is important that each expense is accurately billed and recorded. Especially when the reward points or cashback is large, the tax department may consider it as additional benefit or income.
When are rewards points taxable?
Reward points are generally not taxable as long as they are used only as discounts. But if it is converted into cashback or money and its value exceeds a certain limit within a year, it can be treated as income and taxed.
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How to avoid income tax notice?
The most important thing is that your credit card expenses are in accordance with your stated income. The source of every transaction should be clear and documented. Keep receipts, invoices, bank statements and reimbursement records safely; do not spend unnecessarily on others’ cards with your card.
Proper use of credit card gives benefits, but deceit done in greed for rewards can lead to tax notice. A little caution can save you from big trouble,