In today’s time, the use of credit cards has increased rapidly. People are using it for online shopping, travel, hotels, restaurants, and even EMI payments. But if you think that credit card transactions are only a matter between you and the bank, then clear this misunderstanding now. The Income Tax Department is now keeping a close eye on your card expenses as well, especially when your bill goes above a certain limit.
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When does the tax department come to notice?
The Income Tax Department has fixed some conditions related to credit cards. If a person spends more than Rs 2 lakh in a year with his credit card or pays a bill of more than Rs 1 lakh in cash in any month, then its information reaches the tax department directly. In such cases, the department checks the balance between your income and expenditure. If there is a big difference between the income and expenditure mentioned in your Income Tax Return (ITR), then you may be sent a notice.
What to do when you receive a notice?
Receiving a notice from the Income Tax Department does not mean that you will be fined immediately. It means that you will have to prove from which source you spent so much. You have to clarify whether the expenditure was made from salary, withdrawn from savings, or received money through a gift. If you are unable to give a satisfactory answer, the department can demand tax and also impose a penalty.
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What mistakes to avoid?
Always pay credit card bills through digital means, such as UPI, net banking, or online transfer. Avoiding cash payment is the safest option. Apart from this, while filing ITR, enter the complete details of your income and major expenses correctly. If you have made a big purchase or investment in a particular year, then it is important to clearly show its source. In this way, you can avoid the situation of getting a notice.