New Delhi: These days, credit card usage has increased rapidly. Most people prefer paying with credit cards because of reward points, discounts, and cashback offers. Many users have high credit card limits, which means their monthly bills often run into lakhs of rupees. But did you know – paying huge credit card bills can attract an income tax notice? Let’s understand the rules.
Income Tax Keeps an Eye on Big Credit Card Bills
If your credit card bill crosses Rs 1 lakh, the Income Tax Department may monitor your income and spending patterns. They want to ensure that your earnings justify such expenses.
According to tax rules:
If someone spends more than Rs 2 lakh in a year on credit cards, OR
Pays a single bill of Rs 1 lakh or more in cash
the details are reported to the tax department. Officials then compare your spending with your income mentioned in your Income Tax Return (ITR). If your expenses look higher than your income, a notice may be sent.
What Happens If You Get a Notice?
If you receive such a notice, you must explain your expenses and show proof of your income source. If you fail to do so, the tax department can impose penalties and extra tax.
How to Avoid Income Tax Trouble on Credit Card Bills
Always pay your credit card bills through banking channels (UPI, net banking, cheque, etc.), not in cash.
Avoid making very large transactions beyond your declared income.
