Income tax notice for credit card spends..

[Strange]

Its always per bank limit of 10L because income tax authorities do not get info unless bank reports it in SFT returns which is filed for 1 PAN if transactions cross 10L per bank. So different bank card payment will not be clubbed don't worry.


AIS data is reported April to March but the last date to complete this reporting by bank is 30th June.

Thanks for the clarification.

 

[prc1990]

Well k think money rotation is legal owing to the fact that you are clearing out the taxes at each level .
The rule of thumb to any IT notice is that your income should not increase your expense.
For a declared annual income of 10 lakhs , a annual spending of 50 lakhs is indeed suspicious and you may get a notice .
But as per me if you have paid of the extra taxes that you should have in case of rent payments etc and you can show the trail that the money was out and in to your own account , you should be good . Credit cards directly have option for cash withdrawal also so I don’t think rent payments to self is any different , if you are paying the charges plus tds , plus income tax on the rental income and plus income tax on the capital gain that you are gaining from rental income , and you are paying your bills on time you should be fine.

Just check with a CA

Bhai itna salo se income karke bank me kuch na kuch lump sum amount to hoga hi. To koi ek sal me annual income se jyada expense karna technically possible and rational as well. Har sal repeat karne me problem ho sakta, that's true.

 

[Wealth is my birth right!]

Just now downloaded AIS app for taxpayers which is showing AIS and TIS for last 3 years
Post this year completed we can see for this year too

 

[kushhh]

If the payments are supported by your ITR then you need not worry. I can say for sure that It authorities have limited staff and can't scrutinize all the ITRs manually but major expenses which are disproportionate to the income offered to tax can trigger an enquiry with the risk management system. In any case with justifiable response, AO can drop the case without any tax liability. So don't worry

Thanks for that ..

And how much value transactions i can do from bank account linked with pan , of a non ITR filing individual

 

[sanju8486]

I read Somewhere That You Can Show These Transactions Under Section 44AD Of Income Tax :- https://learn.quicko.com/section-44ad-income-tax

Say You Bought 10k Amazon Gift Card at 5% And Sold Them at 2% Your Profit is 3% i.e 300. But Under Section 44AD, Digital Transactions are deemed at 6% and Cash Transaction are Deemed at 8% And You don't Need to Maintain any Account Books. Now For Above Example :- 6% Of 10k i.e 600 will be your Deemed Income and You'll be taxed at 600 Even Though Your Profit was 300. Transaction Upto 2 Cr Come Under 44AD and After that Audit is necessary.

Now If You Want to Show 3% i.e 300 (Your Real Profit) as income then You Would have no option but to opt for Audit. So it's upto you whether you want to take hassle of Auditing or Just show it as 6% without maintaining any books.

Other Members Can Tell If The above Thing is Valid or not.

It's good information however not sure if we can opt for it... If we can for sure, then it's really really helpful.. thanks, any guidance of anyone on this ? I believe it can be a separate thread so it doesn't go unnoticed

 

[CA Karan Agarwal]

Thanks for that ..

And how much value transactions i can do from bank account linked with pan , of a non ITR filing individual

there is no rule or threshold limit as such. Just major expenses like foreign travel, purchase of forex, restaurant bills more than 20k, electricity and school fees more than 1L etc will catch eye of officer.

 

[SSMV]

I didn't get any notice but yes In last FY I crossed 10 lacs expense with one of my credit card which was present in my Form 26AS and AIS report.

Have you paid any tax for crossing 10 lacs expenses

 

[sanju8486]

there is no rule or threshold limit as such. Just major expenses like foreign travel, purchase of forex, restaurant bills more than 20k, electricity and school fees more than 1L etc will catch eye of officer.

What's your opinion on this CA Saab..


I read Somewhere That You Can Show These Transactions Under Section 44AD Of Income Tax :- https://learn.quicko.com/section-44ad-income-tax

Say You Bought 10k Amazon Gift Card at 5% And Sold Them at 2% Your Profit is 3% i.e 300. But Under Section 44AD, Digital Transactions are deemed at 6% and Cash Transaction are Deemed at 8% And You don't Need to Maintain any Account Books. Now For Above Example :- 6% Of 10k i.e 600 will be your Deemed Income and You'll be taxed at 600 Even Though Your Profit was 300. Transaction Upto 2 Cr Come Under 44AD and After that Audit is necessary.

Now If You Want to Show 3% i.e 300 (Your Real Profit) as income then You Would have no option but to opt for Audit. So it's upto you whether you want to take hassle of Auditing or Just show it as 6% without maintaining any books.

Other Members Can Tell If The above Thing is Valid or not.

 

[CA Karan Agarwal]

What's your opinion on this CA Saab..


I read Somewhere That You Can Show These Transactions Under Section 44AD Of Income Tax :- https://learn.quicko.com/section-44ad-income-tax

Say You Bought 10k Amazon Gift Card at 5% And Sold Them at 2% Your Profit is 3% i.e 300. But Under Section 44AD, Digital Transactions are deemed at 6% and Cash Transaction are Deemed at 8% And You don't Need to Maintain any Account Books. Now For Above Example :- 6% Of 10k i.e 600 will be your Deemed Income and You'll be taxed at 600 Even Though Your Profit was 300. Transaction Upto 2 Cr Come Under 44AD and After that Audit is necessary.

Now If You Want to Show 3% i.e 300 (Your Real Profit) as income then You Would have no option but to opt for Audit. So it's upto you whether you want to take hassle of Auditing or Just show it as 6% without maintaining any books.

Other Members Can Tell If The above Thing is Valid or not.

The calculations are correct but how will your Assessing officer treat this transaction is still a grey area. if the scale/volume and frequency of such transactions are less then consider this as income from other sources(IFOS) in which you need not show 6% as profit or gets the books audited. you can show actual profit as IFOS.
but for someone doing it for livelihood regularly, wait for tax officer to knock the doors with above calculation and corresponding tax liability + interest + penalty.

 

[kushhh]

there is no rule or threshold limit as such. Just major expenses like foreign travel, purchase of forex, restaurant bills more than 20k, electricity and school fees more than 1L etc will catch eye of officer.

And what is the case for only normal upi transactions from that account

 

[CA Karan Agarwal]

And what is the case for only normal upi transactions from that account

no issues.

 

[kushhh]

no issues.

Thank you !👍

 

[amitamie]

Have you paid any tax for crossing 10 lacs expenses

No I don't have to. It was in SFT report only

 

[sanju8486]

The calculations are correct but how will your Assessing officer treat this transaction is still a grey area. if the scale/volume and frequency of such transactions are less then consider this as income from other sources(IFOS) in which you need not show 6% as profit or gets the books audited. you can show actual profit as IFOS.
but for someone doing it for livelihood regularly, wait for tax officer to knock the doors with above calculation and corresponding tax liability + interest + penalty.

Is it fine if my spouse use my credit card for such transactions and include 6% of the turnover in her income tax return ?

I am expecting an turn over of around 1 crore per year..and happy to include 6 lacs in her income..if it's fine ? My spouse pays my credit card bills through her current account or through transfer from current account to mine account to credit card ?

 

[agrawalshishir]

Hi i have a query,

If i am making a travel booking for the pvt ltd company, where our family is the owner , what would be a better thing to do.

1. Directly pay CC from company account or
2. Get reimbursement to personal account and then make payment

Currently, doing option1

@CA Karan Agarwal

 

[CA Karan Agarwal]

Hi i have a query,

If i am making a travel booking for the pvt ltd company, where our family is the owner , what would be a better thing to do.

1. Directly pay CC from company account or
2. Get reimbursement to personal account and then make payment

Currently, doing option1

@CA Karan Agarwal

Both the option does not make much of a difference in my opinion.

Ensure that your ITR supports high value transactions.

In any case, if you/your close family members are the owners then this will be reported as related party transactions in company accounts by auditors.

 

[CA Karan Agarwal]

Is it fine if my spouse use my credit card for such transactions and include 6% of the turnover in her income tax return ?

I am expecting an turn over of around 1 crore per year..and happy to include 6 lacs in her income..if it's fine ? My spouse pays my credit card bills through her current account or through transfer from current account to mine account to credit card ?

If its your card then it will be counted as your business income and you have to pay 6% tax on those transactions since you are earning profit / reward points.

Who does the ultimate settlement of bills is of no importance. If she is paying your card bill, she can claim deduction of genuine business expense.

 

[agrawalshishir]

Both the option does not make much of a difference in my opinion.

Ensure that your ITR supports high value transactions.

In any case, if you/your close family members are the owners then this will be reported as related party transactions in company accounts by auditors.

Will expenses reimbursement come under related party transaction ?

 

[Pavancs]

I have read if credit card spending is >10Lakh in a financial year, It will be updated in AIS (Annual Information Statement) and tax dept may ask for spend proof in some cases.

If i have 3 card from different banks, and spend say 5 lakh, 4 lakh and 3 lakh each (total > 10 lakhs) , will this be reported?

When can high spend on CC can create income tax problems?

 

[Melvinop]

You have to show your spends where you do it