Income Tax Notice on credit card usage!!

[Sachs]

I have heard that if you spend more than 10 L on a credit card in a year, the CC company is required to report it to income tax department.
I have a alot of cards whose maximum benefit I have calculated after watching technofino videos. I have also used yaper recently & I have realized that they have created a safe system (albeit a very hassle filled one for credit card users.)
I was wondering what will happen if I spend 9.5L on all of my 11 cards. Will I be served a notice because I have spent 104L on my cards.
OR
Will I be not served any notice as my spending on any card has not crossed 10 L??

 

[CA Karan Agarwal]

The chances are very less. However inorder to be extra safe you can avoid spending more than 10 lacs on 1 bank's card to avoid SFT reporting and IT office will not get the data of your spends

 

[Wealth is my birth right!]

The chances are very less. However inorder to be extra safe you can avoid spending more than 10 lacs on 1 bank's card to avoid SFT reporting and IT office will not get the data of your spends

Yes i too suggest a couple of points:
A. Don’t spend more than 10l in same card or cards from same bank (magnus guys I know 15l spend waivers lol)
B. With Sal and bonus expectations arrive at a proposed ITR for current fiscal and ensure all cards spend put together not exceed 90% of ITR
Views or discussions are welcome

 

[gurbina]

I would actually like to see a real case of someone getting an IT notice due to credit card usage because that concern popped in my radar a while when I got my Magnus and thought on rotating money via legit channels for the milestones which should not be a problem.
That concern landed me in some less well known forums and sites which were pretty useless but provided bits of useful information here and there, but I was never able to find something concrete and helpful.

Not a CA, but I do not see absolutely any issues at all with many of our tactics as long as everything is done by the books (don't use rent payment to do this for example!).
Like the investment this gentlemen has done monthly is very likely taxable. Also ITR and spends are way way off.
Can spend over 5L+ a month but declares 3L annual ITR which basically half would come from such investments at the very least. Possibly a few times over if he does so with the cumulative earnings he's gotten every time possibly earning a few times over the 3L ITR filed.


Now coming to that, how come in such a forum I don't see much information about CAs?
Could we have a wiki or directory or well know, capable CAs?

 

[CA Karan Agarwal]

I would actually like to see a real case of someone getting an IT notice due to credit card usage because that concern popped in my radar a while when I got my Magnus and thought on rotating money via legit channels for the milestones which should not be a problem.
That concern landed me in some less well known forums and sites which were pretty useless but provided bits of useful information here and there, but I was never able to find something concrete and helpful.

Not a CA, but I do not see absolutely any issues at all with many of our tactics as long as everything is done by the books (don't use rent payment to do this for example!).
Like the investment this gentlemen has done monthly is very likely taxable. Also ITR and spends are way way off.
Can spend over 5L+ a month but declares 3L annual ITR which basically half would come from such investments at the very least. Possibly a few times over if he does so with the cumulative earnings he's gotten every time possibly earning a few times over the 3L ITR filed.


Now coming to that, how come in such a forum I don't see much information about CAs?
Could we have a wiki or directory or well know, capable CAs?

you didnt find anything concrete because there is nothing concrete about this issue. the ITBA risk management system of income tax department selects scrutiny cases based on several parameters and disproportional credit card spending compared to income declared in ITR is one of the risk parameters. Anyway like i said previously, the number of scrutiny case is very limited due to shortage of staff. Using cc for someone else's spend/ manufactured spending might attract tax notice but will not attract tax liability provided you can convince your tax officer that there is no revenue loss and there is no income which has escaped tax.

 

[ARV]

The chances are very less. However inorder to be extra safe you can avoid spending more than 10 lacs on 1 bank's card to avoid SFT reporting and IT office will not get the data of your spends

Hi thanks for all the valuable information, just had one doubt how is the 10 L spending calculated. FY or Calendar year or card annual year. For ex Magnus needs 15L to get fee waiver, if i plan properly i can spend 7.5 in previous FY and 7.5 in this FY and still get fee waiver or should we avoid it completely. My taxable income per year is about 12L.

 

[CA Karan Agarwal]

Hi thanks for all the valuable information, just had one doubt how is the 10 L spending calculated. FY or Calendar year or card annual year. For ex Magnus needs 15L to get fee waiver, if i plan properly i can spend 7.5 in previous FY and 7.5 in this FY and still get fee waiver or should we avoid it completely. My taxable income per year is about 12L.

10 lacs limit calculation is as per financial year - April to march so plan accordingly

 

[ARV]

10 lacs limit calculation is as per financial year - April to march so plan accordingly

Thanks

 

[Wealth is my birth right!]

Hi thanks for all the valuable information, just had one doubt how is the 10 L spending calculated. FY or Calendar year or card annual year. For ex Magnus needs 15L to get fee waiver, if i plan properly i can spend 7.5 in previous FY and 7.5 in this FY and still get fee waiver or should we avoid it completely. My taxable income per year is about 12L.

RBI and IT dept always FY nothing else
So in ur case spend till March 7.5l then another 7.5l after April 1st week

 

[abhinavnbhat]

Thanks a lot for replying, Karan & Wealth. Yup, it's on Magnus, I was hoping to meet the milestone spends every month, and then spend waiver as well. Plus a few expenses on other cards. So 26 AS reporting will happen. However, it wouldn't be more than 70-75% of my ITR.

Yes i too suggest a couple of points:
A. Don’t spend more than 10l in same card or cards from same bank (magnus guys I know 15l spend waivers lol)
B. With Sal and bonus expectations arrive at a proposed ITR for current fiscal and ensure all cards spend put together not exceed 90% of ITR
Views or discussions are welcome

 

[deep@vie]

10 lacs limit calculation is as per financial year - April to march so plan accordingly

not billed but paid amount should not exceed 10l if your ITR IS 10L or less.
If your ITR is more than 10l then your credit card paid bills should not exceed that amount.
you can download your AIS or TIS. If it's not reported/shown there even if your bill paid was 50l. It doesn't matter at all.
you're not going to get a notice in that case.

 

[Wealth is my birth right!]

not billed but paid amount should not exceed 10l if your ITR IS 10L or less.
If your ITR is more than 10l then your credit card paid bills should not exceed that amount.
you can download your AIS or TIS. If it's not reported/shown there even if your bill paid was 50l. It doesn't matter at all.
you're not going to get a notice in that case.

Now it’s time to see which bank is generous in reporting AIS haha
Hdfc already reports full credit utilization to cibil so we can’t expect AIS non reporting from them

 

[blacktiger]

You are wrong in most cases. You, the person, are a different entity from the business you are running. The card belongs to you. Spends on your card are your spends. You are supposed to repay the card from your income. Any swipes on the pos machine of your business will be counted as revenue for your business.

This will cause huge issues later on for both you, and your business. (Since you are spending 120L a year with insufficient income, and your business is generating 120L revenue without paying tax, and reporting the 120L as revenue).

Technically, the conclusion that ITD might reach is, your business generated 120L revenue, but also paid 120L as "salary" to you. Hence the business is at net zero. But you might end up paying 30% of 120L as income tax on salary.

Edit: Of course there are holes in this system, and blind spots exist where ITD doesn't have visibility. But these systems are getting better every year. To reiterate, it's not whether ITD can figure it out by the end of this FY/AY. It's whether they can figure out in the next 5 to 10 years. Now it's upto you to figure out the risk reward equation of this game of hide and seek.

what about cash withdrawal facility at PoS

 

[abhinavnbhat]

@Wealth is my birth right! Something just occurred to me, if a cancel the card on which I have 10l+ spends before financial year-end, will it still reflect in my AIS or TIS. Will the bank still report it to the Income Tax Department?

 

[amit]

@Wealth is my birth right! Something just occurred to me, if a cancel the card on which I have 10l+ spends before financial year-end, will it still reflect in my AIS or TIS. Will the bank still report it to the Income Tax Department?

yes.

 

[iAmPm]

@Wealth is my birth right! Something just occurred to me, if a cancel the card on which I have 10l+ spends before financial year-end, will it still reflect in my AIS or TIS. Will the bank still report it to the Income Tax Department?

on lighter note,
It's like resigning from company in March to not pay income tax.

 

[Wealth is my birth right!]

@Wealth is my birth right! Something just occurred to me, if a cancel the card on which I have 10l+ spends before financial year-end, will it still reflect in my AIS or TIS. Will the bank still report it to the Income Tax Department?

Definitely it will be reported

 

[ccdc]

RBI and IT dept always FY nothing else
So in ur case spend till March 7.5l then another 7.5l after April 1st week

will not work since you'll have april 7.5L sends and next march 7.5L spends which fall in same FY

 

[Wealth is my birth right!]

will not work since you'll have april 7.5L sends and next march 7.5L spends which fall in same FY

Yes for first year only this trick works

 

[bhushan0101]

As per the new income tax system you should get notice within 3 years for such high value transaction. But if you properly explain the rotation of money with reward structure department charge tax only on value of reward generated through those transaction. I had handle such notices in past just to cautious add reward earn through credit card in other income.

 

[gurbina]

As per the new income tax system you should get notice within 3 years for such high value transaction. But if you properly explain the rotation of money with reward structure department charge tax only on value of reward generated through those transaction. I had handle such notices in past just to cautious add reward earn through credit card in other income.

If you did receive it how do you even value rewards earnings? They're not monetary.

Even the value depends highly on the redemption.