New Changes Relating To Credit Card Usage In Income Tax Act 2025
Based on the Draft Income-tax Rules, 2026 and the Income-tax Act, 2025, here are the new and consolidated rules regarding Credit Card usage.
The changes primarily focus on stricter reporting of high-value transactions to the Income Tax Department and the taxation of employer-provided cards.
1. High-Value Spending: “The ₹10 Lakh Rule”
The tax department monitors credit card usage through the Statement of Financial Transactions (SFT). Credit card issuers (banks) must report your transactions in Form No. 165 (which replaces the old Form 61A) if you cross specific limits.
• Bill Payment by Cash: If you pay your credit card bills in cash aggregating to ₹ 1,00,000 or more in a financial year, the bank will report it to the tax department.
• Bill Payment by Any Mode: If you pay your credit card bills by any mode (Cheque, NEFT, Online) aggregating to ₹ 10,00,000 or more in a financial year, it will be reported.
2. Foreign Currency Spending: “Stricter Surveillance”
A significant change in the new rules is the specific lowering of reporting thresholds for foreign currency transactions if PAN is not provided.
• The Rule: Any expense in foreign currency through a Credit Card (or Debit Card/Forex Card) is reportable by the authorised dealer (bank).
• New Thresholds (Draft Rule 237):
◦ If you provide PAN: Transactions aggregating to ₹ 10 Lakh or more in a year are reported.
◦ If you do NOT provide PAN: Transactions aggregating to just ₹ 5 Lakh or more in a year are reported.
◦ Impact: This aims to track high-value foreign travel and shopping expenses more closely.
3. Employer-Provided Credit Cards (Perquisites)
If your employer provides you with a credit card (including add-on cards) and pays the bills, it is treated as a taxable perquisite (benefit) in your salary.
• Taxable Value: The actual expenditure incurred (including membership/annual fees) by the employer.
• Exemption: The amount is Not Taxable if:
1. The expenses are incurred wholly and exclusively for official purposes;
2. The employer maintains complete details (date, nature of expense); and
3. The employer gives a certificate confirming the official nature of the expense.
4. Mandatory Quoting of PAN
Under Rule 159 (replacing Rule 114B), you must quote your Permanent Account Number (PAN) when:
• Making an application for the issue of a Credit Card (or Debit Card).
• This applies to all such applications, regardless of the limit.
5. Business Expenses & Deductions
• Allowed Mode: Credit Card is recognized as a “specified electronic mode”. Payments made via Credit Card for business expenses exceeding ₹ 10,000 in a day are allowed as a deduction (whereas cash payments > ₹ 10,000 are disallowed).
• Acceptance Mandatory: Businesses with a turnover exceeding ₹ 50 Crore must provide facilities to accept payments through prescribed electronic modes, which includes Credit Cards.
Summary Table: Credit Card Triggers
Action | Threshold for Reporting/Tax | Consequence |
|---|---|---|
Paying Bill in Cash | > ₹ 1 Lakh / year | Reported to Tax Dept (SFT) |
Paying Bill Online | > ₹ 10 Lakh / year | Reported to Tax Dept (SFT) |
Foreign Spend (With PAN) | > ₹ 10 Lakh / year | Reported to Tax Dept |
Foreign Spend (No PAN) | > ₹ 5 Lakh / year | Reported to Tax Dept |
Personal Use (Company Card) | Any Amount | Added to Salary as Taxable Income |