7 Credit Card Transactions That May Trigger Income Tax Notices

Certain credit card transactions , especially high-value ones, can attract unwanted attention from the Income Tax Department . To avoid receiving a tax notice, it’s crucial to be aware of the types of transactions that are monitored closely. Here’s a list of seven common transactions that could lead to scrutiny.

1. Excessive Foreign Travel Spending
Spending over ₹2 lakh on foreign travel in a year is automatically reported to the Income Tax Department. Keep track of such expenses to avoid raising red flags.

2. Large Credit Card Expenses
Annual credit card spending exceeding ₹2 lakh may trigger the department’s attention. Such high usage is often flagged for further investigation.

3. Cash Payments Over ₹1 Lakh for Credit Card Bills
Paying credit card bills in cash amounts exceeding ₹1 lakh is closely monitored. Such transactions may be flagged for review.

4. Heavy Investments in Mutual Funds & Stocks

Investments surpassing ₹10 lakh in mutual funds, stocks, or bonds annually are reported to the Income Tax Department. If you’re making substantial investments, ensure proper documentation.

5. High-Value Property Purchases
Purchases of property valued at ₹30 lakh or more automatically generate reports to the Income Tax Department. Be mindful of such transactions and maintain clear records.

6. Large Cash Deposits
Depositing over ₹10 lakh in cash into your bank account can attract attention. Such deposits are closely scrutinized to ensure the source of income is legitimate.

7. High-Value Business Transactions in Cash
Business transactions involving cash payments over ₹50,000 are tracked. Keep records of these transactions, as the Income Tax Department may request proof of the source of funds.

Avoiding these high-risk credit card transactions or ensuring you have proper documentation can significantly reduce the chances of receiving an income tax notice. Always keep track of your spending patterns and maintain clear records.