With increasing lucrative rewards and offers on credit cards, it has been seen that monthly credit card expenditure in India has increased rapidly in the past few years. According to the data available on the internet, it has been recorded that credit card usage is 4 times higher than debit cards.
As long as you are paying your bills on time, there is nothing wrong with using credit cards to make payments and enjoy the rewards. However, you must know about the tax implications of overspending with your credit card. Let us take help from this article to understand how to use our credit cards correctly.
Income Tax Rule for Credit Card Expenses
Although there is no rule for using credit cards, banks and other financial institutions are mandated to report any high-value transactions to the Income Tax Department. These transactions include all the payments made above worth Rs. 10 Lakh.
In addition to this, it is important to inform the tax department of the repayment of a credit card bill of Rs. 1 Lakh or more with cash.
Excess Credit Card Expenses & Income Tax scrutiny
As mentioned above, you will attract the Income Tax Department investigation in the following cases:
- Cash payment for a bill more than Rs. 1 Lakh or more.
- Purchase worth Rs. 10 Lakh or more.
What should Credit Card Users Do?
To avoid all these things, credit cards users should do the following things:
- Avoid making a purchase of more than Rs. 10 Lakh.
- Not make cash payments of bills over Rs. 1 Lakh.
- Repay their bills on time.
- Suggested usage of credit cards is 30% of their limit.
- Avoid using more than 80% of your credit limit.
Conclusion
In this article, we learnt about how much credit card usage can attract Income Tax investigation. Please go through this article properly before you start using your credit card. Also, share this article with your friends and family members who are in the habit of using a credit card more than needed.
Also Read:
Best Credit Cards with the Best Banks in India with Best Features
