Credit card bill crossed 10L this year — will income tax notice come?

Question

Hi everyone, I'm Meena from Chennai. I'm a salaried person, take home around ₹72k per month. This year my credit card spending has gone up a lot — partly because I started putting everything on card (groceries, petrol, online shopping, even paid some relatives' hotel bookings and they gave me cash back). Total spending on my HDFC Regalia is probably around ₹10-11 lakhs for the year.

Now my friend is saying income tax department tracks credit card spending above 10 lakhs and can send notice. I'm getting scared. My ITR shows income around ₹9.5L (gross). So technically my spending is MORE than my reported income after tax. Will they flag this? Do I need to do anything before March or when filing ITR? I don't have any other income I'm hiding, it's genuinely the cash from relatives thing and putting everything on card. Is there a way to explain this if I get a notice? Very stressed about this.

Answer 1

Honestly, I've been through something similar so let me tell you exactly what's happening here.

Yes, the income tax department does track high-value credit card transactions. Under the Annual Information Return (now called AIS — Annual Information Statement), banks are required to report credit card payments exceeding ₹1 lakh per month (cash payments) or aggregate spending above ₹10 lakhs in a year to the IT department. So your HDFC Regalia data is almost certainly sitting in your AIS already. You can check it yourself — log in to incometax.gov.in, go to AIS/TIS section, and see what's reported against your PAN.

Now here's the thing — getting flagged is not the same as getting a notice. The department runs these through algorithms. If your spending is ₹10-11L and your gross income is ₹9.5L, there is a mismatch on paper. But remember your gross income isn't your take-home. You likely paid around ₹1-1.5L in taxes and another chunk in PF. So actual cash in hand over the year was probably ₹7.5-8L. And you spent ₹10-11L on card. That gap will look suspicious to the system.

What saves you is documentation. The relatives-paying-cash-you-swipe thing is actually very common, but you need to show it. Keep WhatsApp messages, UPI receipts, or even a simple written note of who paid you cash and when. If your cousin paid you ₹30k cash and you used the card for their hotel, that's explainable — but only if you can show it.

One thing most people get wrong: they think just because the spending was on legitimate things, they're safe. The IT department doesn't know your spending was legitimate — they only see the number. The burden is on you to explain if asked.

What I'd recommend: right now, download your AIS, cross-check everything, and note down any large transactions that involved cash from others. If you do get a notice under Section 133(6) or 142(1), respond within the deadline with a clear explanation and supporting documents. Don't panic, don't ignore it.

For future years, if amounts are big, have relatives do a UPI transfer to you instead of cash — creates a clean paper trail and saves you this headache entirely.