New Delhi: Payment via credit card offers financial convenience and flexibility, but what if the same process creates a problem later? A customer, who paid bills using credit card, came under income tax scanner. The entire payment, made via credit card, was treated as his income and a tax notice was served to him.
The primary reason behind this? The credit card was linked to his PAN card.
Sujit Bangar, founder of taxbuddy.com, shared the example of a credit card user who got income tax notice on his credit card payment. In a series of post on X, Bangar, also explained the advantages of maintaining a clear documentation track to challenge such orders.
Sharing an Income Tax Appellate Tribunal ruling, Bangar explained that this case can be a lesson for people in document maintaining. Because, in matters of taxation, what saves you is not a technical loophole or a clever argument — but proper documentations.
“Prateek made credit card payments of ₹16.6 lakh. Tax Officer treated the entire amount as his income. If you repay using credit cards, here’s how to save yourself,” he tweeted.
The reason, why the notice came to the customer was because it was linked to his PAN card, despite a probable instance, that the card might have been used by family or business entities.
“Your credit card may be used by family or business entities. But for tax records, the card is still linked to your PAN. That means the first notice may come to you,” he wrote.
However, what saved the client was a proper documentation channel. The client was able to show that the card payments were made by his father, brother, partnership firms, HUF-related entity and himself. Further, documents such as Bank statements, Confirmations, ITRs of parties, Firm financials and Affidavits, showed that the full amount was not his personal spending.
ITAT’s, upon examining the documents arrived at the view that the payments were partly made by the card user and partly by others on the basis of documents and evidences. The entire Rs 16.6 lakh addition was deleted.
Bangar explained that if you have proper documents and keep key payment proofs, bank trail and purpose records, you can be saved from a lot of hassles.
“Because in tax, documentation saves you more than explanations,” he wrote.
