Outlook Money
Credit card usage in India has surged over the years, with transactions reaching 4,472 million in 2024 and a total value of Rs 20.40 trillion.
High or frequent rewards that exceed normal personal use may attract scrutiny from the Income Tax Department as they could resemble income rather than routine discounts.
Spending without real economic activity, like rotating money or lending to friends for repayment later, can create the appearance of high spending and raise tax department concerns.
Repeatedly topping up digital wallets or transferring money via gateways without purchases may appear as spending, even if no real economic activity occurs, attracting tax scrutiny.
Paying rent for friends or relatives using credit cards without genuine agreements can draw attention from authorities and may impact house rent allowance claims.
Allowing friends or family to use your credit card with informal reimbursements through cash, UPI, or transfers may be counted as your personal spending by tax authorities.
Rewards used to reduce purchases are usually tax-free. Monetized rewards or points exceeding Rs 50,000 annually must be reported under ‘Income from Other Sources’ in tax returns.
Maintain records of all transactions with invoices, receipts, and statements. Ensure spending aligns with declared income to reduce the likelihood of scrutiny and stay compliant.