Caught in a Credit Card Cycle: Seeking Advice on Avoiding Tax Troubles

[vineeth-ch]

I’m seeking advice from the community regarding an issue I’m facing. I wasn’t aware that excessive credit card use could lead to complications. Over the past financial year, my friend used my credit cards multiple times, accumulating expenses totalling around 48 lakhs. He had an emergency that required 6 lakhs, which he paid using my credit card. To repay that, he kept rotating the amount using my credit cards.

I’m now concerned that this activity might attract an income tax notice. Does anyone have suggestions on how I can address or mitigate this situation?

 

[Skylar]

@launchcraft

 

[abhimarda]

I’m seeking advice from the community regarding an issue I’m facing. I wasn’t aware that excessive credit card use could lead to complications. Over the past financial year, my friend used my credit cards multiple times, accumulating expenses totalling around 48 lakhs. He had an emergency that required 6 lakhs, which he paid using my credit card. To repay that, he kept rotating the amount using my credit cards.

I’m now concerned that this activity might attract an income tax notice. Does anyone have suggestions on how I can address or mitigate this situation?

If your annual income is substantially more than Rs 48 lacs p.a. then it should not be a major issue. Also, if in one financial year if total expenses cards issued by one bank do not exceed Rs.10 lakhs, then probably you won't get a notice as that won't be reported by the bank E.g. if 48 lakhs was rotated using credit cards of 8 different banks equally i.e. Rs 6 lakhs each probably there is lower chance of getting a notice (assuming no other expenses on credit cards in whole year else add those as well). However, you better keep all the proofs and documentation ready to show what actually happened if you get a notice.

 

[Bharatiya Nagrik]

I’m seeking advice from the community regarding an issue I’m facing. I wasn’t aware that excessive credit card use could lead to complications. Over the past financial year, my friend used my credit cards multiple times, accumulating expenses totalling around 48 lakhs. He had an emergency that required 6 lakhs, which he paid using my credit card. To repay that, he kept rotating the amount using my credit cards.

I’m now concerned that this activity might attract an income tax notice. Does anyone have suggestions on how I can address or mitigate this situation?

Sorry brother but I don't think I would have the heart to give my cards to such a friend. He should have honestly repaid you back the initial amount of 6 lacs ASAP. But using your cards to keep rotating that money is big red flag. I hope the actual amount has been settled else it will be a big issue in your credit score. Just keep all evidences ready with you just in case.
As they say hope for the best but also be prepared for the worst.

 

[launchcraft]

I’m seeking advice from the community regarding an issue I’m facing. I wasn’t aware that excessive credit card use could lead to complications. Over the past financial year, my friend used my credit cards multiple times, accumulating expenses totalling around 48 lakhs. He had an emergency that required 6 lakhs, which he paid using my credit card. To repay that, he kept rotating the amount using my credit cards.

I’m now concerned that this activity might attract an income tax notice. Does anyone have suggestions on how I can address or mitigate this situation?

First of all tell us that are there any dues with any bank which is yet to be paid..because if that's the case bank might send you notice and the remaining amount will attract interest, so clear them all..
Now the second part about the income tax notice, what's your income range if you can tell us and are your expenses from your credit card valid because if they are not depart may ask you to give proof for your expenses...

 

[vineeth-ch]

If your annual income is substantially more than Rs 48 lacs p.a. then it should not be a major issue. Also, if in one financial year if total expenses cards issued by one bank do not exceed Rs.10 lakhs, then probably you won't get a notice as that won't be reported by the bank E.g. if 48 lakhs was rotated using credit cards of 8 different banks equally i.e. Rs 6 lakhs each probably there is lower chance of getting a notice (assuming no other expenses on credit cards in whole year else add those as well). However, you better keep all the proofs and documentation ready to show what actually happened if you get a notice.

Hi Abhimarda
My income is 13 Lakhs!
I have over used my credit card.. one exceeded 12 Lakhs and other is around 35 Lakhs. What kind of documents would be helpful? Worst case what will happen? Can you please help me on this?

Thanks a lot for your help!

 

[vineeth-ch]

Sorry brother but I don't think I would have the heart to give my cards to such a friend. He should have honestly repaid you back the initial amount of 6 lacs ASAP. But using your cards to keep rotating that money is big red flag. I hope the actual amount has been settled else it will be a big issue in your credit score. Just keep all evidences ready with you just in case.
As they say hope for the best but also be prepared for the worst.

Thanks for your help bro!
When you say keep all evidences ready, what kind of evidences are they? Can you please help me in this?
I am really worried right now!

 

[abhimarda]

Hi Abhimarda
My income is 13 Lakhs!
I have over used my credit card.. one exceeded 12 Lakhs and other is around 35 Lakhs. What kind of documents would be helpful? Worst case what will happen? Can you please help me on this?

Thanks a lot for your help!

All the documents showing how 48 lakhs was spent and to show that it's actually not 48 lakhs but only 6 lakhs getting rotated multiple times. You will require all the bank statements where the money came in...if it was used to transfer cash from credit card and then paying it back...or by whatever way it was done...the whole documentation related to it. And what exactly were you doing when your card was being used in this way. It should have been paid off after the emergency in full or in EMI if the amount was heavy on you or your friend. Such kind of usage in your card may be bad for your credit score as well if your utilisation was more than 30% for more than couple of months. It will take few years to correct if it has gone down.

 

[Bharatiya Nagrik]

Thanks for your help bro!
When you say keep all evidences ready, what kind of evidences are they? Can you please help me in this?
I am really worried right now!

As mentioned by Abhimarda keep the statements to prove the actual transaction and your income proofs etc.