Credit Card Add on Card

[sairamrahul]

My Question is regarding add on card, I have close to 10 add on cards, now my query is regarding add on cards, If I get add on cards for 4 to 5 cards and give it to my family members, the credit card utilizaition done on each of this cards are treated seperatly as per income tax norms for example

I have ICICI card of credit limit say 15 lakhs --I request for add on card for my father - my father(His salary is 25 lakhs per anum)-- he uses this card say around 10 lakhs in financial year - me with salary of 24 lakhs -I will also use the credit card for 10 lakhs in financial year- So as per the income tax rules-the amount spent on credit cards would be on my account however if the add on card holder spends money will that be treated as my expenses or on the add on card holder expense and calucated accordinly.

 

[TaxWiser]

My Question is regarding add on card, I have close to 10 add on cards, now my query is regarding add on cards, If I get add on cards for 4 to 5 cards and give it to my family members, the credit card utilizaition done on each of this cards are treated seperatly as per income tax norms for example

I have ICICI card of credit limit say 15 lakhs --I request for add on card for my father - my father(His salary is 25 lakhs per anum)-- he uses this card say around 10 lakhs in financial year - me with salary of 24 lakhs -I will also use the credit card for 10 lakhs in financial year- So as per the income tax rules-the amount spent on credit cards would be on my account however if the add on card holder spends money will that be treated as my expenses or on the add on card holder expense and calucated accordinly.

Great question! Here's how it works:

1. Primary vs. Add-On Cardholder:

- The primary cardholder is responsible for all transactions made on both the primary and add-on cards.​

- For tax purposes, the total spending on the credit card (including add-on cards) is considered the primary cardholder's expense.​

2. Income Tax Treatment:

- Even if your father uses the add-on card and spends ₹10 lakhs, this amount is treated as your expense since you are the primary cardholder.​

- The same applies to your own spending of ₹10 lakhs on the primary card.​

3. Documentation:

- It's crucial to maintain clear records of who made which transactions, especially if the expenses are significant. This can help in case of any queries from the Income Tax Department.​

4. Impact on Credit Utilization:

- The credit utilization ratio is calculated based on the total credit limit and the total amount spent on both the primary and add-on cards.​

In summary, for tax purposes, all expenses made on the add-on cards are treated as your expenses, not the add-on cardholder's. However, consulting a tax professional is always a good idea!

(Source: Conversation with Gemini AI)

 

[sairamrahul]

Thank you for your reply, Would u mind helping with below scenario as well

I have overdraft loan of rupees 35 lakhs, I generally rotate 10 lakh rupees for month, from my credit card to merchat and then to overdraft, Now my question is regarding income tax notice.. Since I am already paying intrest on over draft which is 1.10% per month, will there is a possibility that notice would be served? if yes can I defend by mentionog the tax is already paid for overdraft.

 

[zacobite]

My Question is regarding add on card, I have close to 10 add on cards, now my query is regarding add on cards, If I get add on cards for 4 to 5 cards and give it to my family members, the credit card utilizaition done on each of this cards are treated seperatly as per income tax norms for example

I have ICICI card of credit limit say 15 lakhs --I request for add on card for my father - my father(His salary is 25 lakhs per anum)-- he uses this card say around 10 lakhs in financial year - me with salary of 24 lakhs -I will also use the credit card for 10 lakhs in financial year- So as per the income tax rules-the amount spent on credit cards would be on my account however if the add on card holder spends money will that be treated as my expenses or on the add on card holder expense and calucated accordinly.

everything is on your PAN per bank.. add on cards are all tagged to main card / card holder

 

[TaxWiser]

Thank you for your reply, Would u mind helping with below scenario as well

I have overdraft loan of rupees 35 lakhs, I generally rotate 10 lakh rupees for month, from my credit card to merchat and then to overdraft, Now my question is regarding income tax notice.. Since I am already paying intrest on over draft which is 1.10% per month, will there is a possibility that notice would be served? if yes can I defend by mentionog the tax is already paid for overdraft.

Sure, I can help with that!

Possibility of Receiving an Income Tax Notice:

- High-Value Transactions: Frequent high-value transactions, like rotating ₹10 lakhs monthly, can attract scrutiny from the Income Tax Department.​

- Documentation: Ensure you have clear records of all transactions, including the purpose and parties involved.​

Defending Your Case:

- Interest Payments: The interest you pay on the overdraft is not directly related to income tax on transactions. However, it shows that you are servicing a loan.​

- Transaction Records: Maintain detailed records of all transactions, including invoices, bank statements, and any correspondence with merchants.​

- Purpose of Transactions: Clearly document that the transactions are for business or personal purposes, and not for generating unreported income.​

Key Points to Note:

- Interest on Overdraft: The interest paid on the overdraft is a financial expense and does not directly impact your income tax liability.​

- Income Tax Notice: If you receive a notice, you can explain the nature of the transactions and provide supporting documents to show that they are legitimate and that you are already paying interest on the overdraft.​

Recommendations:

- Consult a Tax Professional: Given the complexity and the amounts involved, it's advisable to consult a tax professional who can provide personalized advice and help you prepare for any potential queries from the Income Tax Department.​

- Maintain Records: Keep all transaction records organized and easily accessible to substantiate your claims if needed.​

(Source: Conversation with Gemini AI)

 

[sairamrahul]

everything is on your PAN per bank.. add on cards are all tagged to main card / card holder

noted thank you