When Credit Card Spending Outpaces Your Salary

Swipe, tap, repeat. For many salaried professionals, that’s the rhythm of everyday expenses. From equated monthly installments (EMIs) to flight bookings, the credit card has become the easiest way to spend first and think later. But there’s a catch: if your card usage starts looking much bigger than your salary package, the Income Tax Department may want to know how you’re funding that lifestyle.

Take a simple example. Someone with a Rs 10 lakh salary ends up spending Rs 30 lakh in a year through cards. Even if the spouse, parents, or in-laws settled the extra Rs 20 lakh, the mismatch between income and spending will still be visible in official records.

Why It Gets Flagged

Every rupee spent through a card is reported. Banks send details to the tax department if your annual card spends more than Rs 10 lakh, or if you clear card dues worth more than Rs 1 lakh in cash. These figures are reflected in your annual information statement (AIS) and taxpayer information summary (TIS), which are then matched with what you file in your tax return.

“High credit card spending exceeding your declared annual salary or savings can trigger an income tax notice. This can lead to a mismatch of declared income and spending reported in your AIS or TIS,” explains Deepak Kumar Jain, founder and CEO, TaxManager.in, the tax advisory and e-filing portal platform of Rising Advisory Services.

When such a gap is spotted, the department may send a notice under Section 133(6) or 148, essentially asking: where did the extra money come from?

Family Support Is Allowed, But…

In most households, it isn’t unusual for relatives to pitch in. A spouse may pay off half the dues, or a father might clear a big-ticket expense. This is allowed, but it needs a money trail. Payments from close relatives can be treated as gifts, and gifts from immediate family are not taxable.

The problem arises when there’s no paper or digital record to prove it. Says Jain, maintaining proof “on the safer side,” whether through a bank transfer slip or even a simple gift deed, ensures you can show the source if questioned.

Staying Out Of Trouble

A few practical habits can save a lot of stress later:

• Keep payments digital rather than in cash.

• File away receipts, statements, and transfer records.

• Record family help properly, instead of leaving it informal.

• Most importantly, keep spending in line with your income and declared savings.

The bottom line is straightforward. The department is not against high spending; it simply wants the spending to make sense when compared to your income. If relatives are helping, acknowledge it properly. If you have additional income, declare it.

Credit cards are a fantastic tool when used smartly. But when they become a bridge to a lifestyle that looks too large for your salary, it’s best to step back, document carefully, and avoid giving the taxman reasons to knock on your door.