What is the best approach while giving/lending your credit card to friends/family

[the_collector]

No one minds about it as long as you do it within your income. You already pay tax for your income.

You'll more likely to get into IT radar if you spend more than 10 Lakhs on a single bank as it gets reported to IT.

On other hand, it also depends on your income.

If we have income of 10L and spend 5L on card in a year, again no one could ask as we do pay tax for 10L income.

But, if we have salaried income of 5L and spend 6L, that looks suspicious and might fall under scrutiny.

So, if it's just one time uses your card for 50k, it doesn't matter. Make sure you don't cross those limits.

Note: Any income that you receive in your bank account have to report and categorize properly like Interest, Dividend, Gifts etc. and pay tax accordingly, this is on paper rule.



Further Ref:

https://www.financialexpress.com/money/income-tax-on-credit-card-how-much-can-you-spend-without-attracting-tax-scrutiny-2949483/

Hope it helps

Thank you! Super helpful.

It falls within my income range so it should be okay for now then.

Also wanted to mark your answer as solution but I am unable to!

 

[RAMESH BABU N]

....My original question was purely from a tax and notice perspective, I realised I was getting money from different sources into my bank and while I know what it is for, I did not want it to attract an IT notice and hence the question.

Simple solution - maintain an xls file containing all details. And, preserve ecopies of all CC statements and related bank account statements. They may be helpful - in case you need it at a later date/month/year/decade. As of now, legally, ITD can seek details for 7 FYs. Who knows, it may get reduced to 5 or increased to 10. So, we must be well prepared. They lose nothing by just asking. It is we who need to do the donkey's work.

 

[joshuatree]

Here's my personal experience:

I have faced a case where I got an IT notice for some credit cards spends made for work. Payments at 5-star hotels for events, etc. Office finance guys used to encourage it because it gave them free credit too and they would make payment just a day or two before due date and directly to my card. But when the IT notice came the office finance guys were suddenly shy about giving me a letter that certified these were official expenses. I was told that I enjoyed rewards (and this was 15 years ago when rewards were jackshit!). All because it meant more work for them. Had to escalate to CFO level before I got some help. Was scary for a few days till I escalated and got what I needed. You get an IT notice and the people who have used the facility through you suddenly look away. I refused to use my personal credit card for office expenses after that. Damn the rewards--the stress wasn't worth it.

Remember that 10 lakhs spend and only then IT risk, etc., is not part of written/codified rules, AFAIK. It may largely be true for many but IT is not bound by such assumptions--they can always ask for more details, especially if your IT return is randomly picked up for further checks. Once they start getting into something all of these Google Pay credits, and perhaps total spend over income will become red flags that they will dig into.

So ideally, reduce such help, except for close family. Risk is always there, no matter how small, even with close family.

And in case someone uses your card, get payments made by them directly to credit card account--they can pay via NEFT from their account or UPI and well before due date. Do not get funds into your account via Google Pay. Remember, if IT Dept comes calling, friends often disappear!