Income tax notice for credit card spends..

[sanju8486]

Hello everyone .

It's Rule that Bank will report transactions above 10 lacs in a year by any person to income tax authorities..

i have seen many people rotating money by rent, bills payment or selling credit cards.. well infact, I am too a part of it....

Has anyone recieved notice from ITR anytime ? i believe rotating money, card sharing for reward points/cashback is not legal?

What should be the course of action or anyone has any experience out of it..

P.S :- In last Year ITR, my AIS shows 13 lacs credit card bills payment to axis.. My annual salaried income is 10 lacs... i ignored the AIS and filed ITR as it is in my form-16.. please guide me .. Unaware on any such legality/rules..

My cc spendings this year is approx 40-50 lacs😟

 

[Tosh]

Let me repost one of my comments from another similar thread...

- You better start looking for a top tier CA who can probably justify your spends and somehow match income and expenses.

Don't want to sound negative but why would you do so much spends when your income is less than your spends (1/5th in your case). Were the rewards really worth it?

As far as the IT notice goes it can take upto 7 years for them to send you one. When it does you better have explanation ready for your numbers else tax penalty can go as high as 60% of expenses and in your case that would be in the ballpark of 25/30 Lakhs.

 

[Dr-green69]

Selling credit cards?? How? Whats that?

 

[anirban.choudhury]

Well k think money rotation is legal owing to the fact that you are clearing out the taxes at each level .
The rule of thumb to any IT notice is that your income should not increase your expense.
For a declared annual income of 10 lakhs , a annual spending of 50 lakhs is indeed suspicious and you may get a notice .
But as per me if you have paid of the extra taxes that you should have in case of rent payments etc and you can show the trail that the money was out and in to your own account , you should be good . Credit cards directly have option for cash withdrawal also so I don’t think rent payments to self is any different , if you are paying the charges plus tds , plus income tax on the rental income and plus income tax on the capital gain that you are gaining from rental income , and you are paying your bills on time you should be fine.

Just check with a CA

 

[anirban.choudhury]

Well k think money rotation is legal owing to the fact that you are clearing out the taxes at each level .
The rule of thumb to any IT notice is that your income should not increase your expense.
For a declared annual income of 10 lakhs , a annual spending of 50 lakhs is indeed suspicious and you may get a notice .
But as per me if you have paid of the extra taxes that you should have in case of rent payments etc and you can show the trail that the money was out and in to your own account , you should be good . Credit cards directly have option for cash withdrawal also so I don’t think rent payments to self is any different , if you are paying the charges plus tds , plus income tax on the rental income and plus income tax on the capital gain that you are gaining from rental income , and you are paying your bills on time you should be fine.

Just check with a CA

*expense should not be more than income
Sorry for the typo there

 

[Tosh]

Well k think money rotation is legal owing to the fact that you are clearing out the taxes at each level .
The rule of thumb to any IT notice is that your income should not increase your expense.
For a declared annual income of 10 lakhs , a annual spending of 50 lakhs is indeed suspicious and you may get a notice .
But as per me if you have paid of the extra taxes that you should have in case of rent payments etc and you can show the trail that the money was out and in to your own account , you should be good . Credit cards directly have option for cash withdrawal also so I don’t think rent payments to self is any different , if you are paying the charges plus tds , plus income tax on the rental income and plus income tax on the capital gain that you are gaining from rental income , and you are paying your bills on time you should be fine.

Just check with a CA

This is true but if he is doing all of it then 99% of the times he would end up net negative. The term rotation is used loosely but most of the times it's just exploiting loop holes to gain points/rewards without having to incur any 'cost'

Having said that if all is done as per the books then your expenses can be infinity high a CA will still be able to justify it but again that's a big IF

 

[anirban.choudhury]

This is true but if he is doing all of it then 99% of the times he would end up net negative. The term rotation is used loosely but most of the times it's just exploiting loop holes to gain points/rewards without having to incur any 'cost'

Having said that if all is done as per the books then your expenses can be infinity high a CA will still be able to justify it but again that's a big IF

Yea money rotation for rewards points is just crazy , not sure why would anyone do that . I can understand if you are making fake rent and they using the money in some instrument to get capital gains , which would outrun the tax implications .
Which is highly unlikely owing to all the charges put in place .

 

[anirban.choudhury]

The best case for fake rent will be something like this
Send fake rent less than 50k like 45k per month to some account with 0 income
That should save the IT and TDS
Then use that amount to invest in some arbiterage instrument to gain capital gain, get taxed at 15% and then pay off the bill

Not sure how much profit one could make using this

 

[Slayer]

Let me repost one of my comments from another similar thread...

- You better start looking for a top tier CA who can probably justify your spends and somehow match income and expenses.

Don't want to sound negative but why would you do so much spends when your income is less than your spends (1/5th in your case). Were the rewards really worth it?

As far as the IT notice goes it can take upto 7 years for them to send you one. When it does you better have explanation ready for your numbers else tax penalty can go as high as 60% of expenses and in your case that would be in the ballpark of 25/30 Lakhs.

Ngl wanted to see posts like these

 

[SiddharthR]

What if someone doing a business & pays vendor a crore/year & from that profit/income is only 5L, how can it be justified?

 

[TheMentalist]

What if someone doing a business & pays vendor a crore/year & from that profit/income is only 5L, how can it be justified?

The ITR will be showing turnover and these expenses also, so nothing more to justify

 

[sanju8486]

Let me repost one of my comments from another similar thread...

- You better start looking for a top tier CA who can probably justify your spends and somehow match income and expenses.

Don't want to sound negative but why would you do so much spends when your income is less than your spends (1/5th in your case). Were the rewards really worth it?

As far as the IT notice goes it can take upto 7 years for them to send you one. When it does you better have explanation ready for your numbers else tax penalty can go as high as 60% of expenses and in your case that would be in the ballpark of 25/30 Lakhs.

Thanks for the insight...
I have never been into CA game..

May i have the information how much CA is expected to charge for such consultations/maintenance of records

 

[sanju8486]

Selling credit cards?? How? Whats that?

Bro like i buy gift cards of amazon at discounts using credit card and sell them..

Pay e bills using axis ace @5% and sharing cb at 2.5% each and similiar in case of flipkart axis and amazon icici for placing orders for friends on cb sharing basis...

 

[sanju8486]

Well k think money rotation is legal owing to the fact that you are clearing out the taxes at each level .
The rule of thumb to any IT notice is that your income should not increase your expense.
For a declared annual income of 10 lakhs , a annual spending of 50 lakhs is indeed suspicious and you may get a notice .
But as per me if you have paid of the extra taxes that you should have in case of rent payments etc and you can show the trail that the money was out and in to your own account , you should be good . Credit cards directly have option for cash withdrawal also so I don’t think rent payments to self is any different , if you are paying the charges plus tds , plus income tax on the rental income and plus income tax on the capital gain that you are gaining from rental income , and you are paying your bills on time you should be fine.

Just check with a CA

Thanks for the insight information...

 

[sanju8486]

Yea money rotation for rewards points is just crazy , not sure why would anyone do that . I can understand if you are making fake rent and they using the money in some instrument to get capital gains , which would outrun the tax implications .
Which is highly unlikely owing to all the charges put in place .

Rent is just a small portion of my 1-2 lacs ...
Basically spends are buying in Amazon gift cards of approx 20-25 lacs per year, e bills 6-8 lacs and then miscellaneous cb sharing deals...

 

[Wealth is my birth right!]

Pro tip:
Arrive at ur income approximately like fixed salary, variable bonus, Fd interests, ur let out properties rent receipts etc and you will get a fig in April 1st week finally look that all ur spends or rotation or yaper all put together not exceed this fig then go to sleep happily
IT dept not fools to send notice to a guy who spends less than income earned
By this way u can save CA charges too🤗😋

 

[kushhh]

How much can I transfer in that 0 income account

The best case for fake rent will be something like this
Send fake rent less than 50k like 45k per month to some account with 0 income
That should save the IT and TDS
Then use that amount to invest in some arbiterage instrument to gain capital gain, get taxed at 15% and then pay off the bill

Not sure how much profit one could make using this

 

[Slayer]

How much can I transfer in that 0 income account

Do maths

 

[gurbina]

The best case for fake rent will be something like this
Send fake rent less than 50k like 45k per month to some account with 0 income
That should save the IT and TDS
Then use that amount to invest in some arbiterage instrument to gain capital gain, get taxed at 15% and then pay off the bill

Not sure how much profit one could make using this

This doesn't make any sense. How would you be saving any IT and TDS?

 

[Tosh]

This doesn't make any sense. How would you be saving any IT and TDS?

By to some account I am sure he meant someone/pan with no income. So they would stay under the 5/7.5L limit and you can claim HRA deduction on the transferred amount.