Credit Card: Do you have a credit card? These 5 new rules will come into effect from April 1st..

Some major changes are set to take place for credit card users from April 1, 2026. The Income Tax Department has released the Draft Income Tax Rules 2026. These rules, once finalized, will come into effect and replace the old 1962 rules. They contain five key provisions related to credit cards that could impact your spending and taxes. These changes are being implemented to ensure greater transparency in transactions and prevent tax evasion.

These are currently only drafts, so we'll have to wait until they are finalized. If implemented, those making large spending through credit cards will have to exercise greater caution. Let's explain these rules.

First Rule
The draft rules propose stricter regulations regarding credit card spending. If an individual makes a digital payment (excluding cash) of ₹10 lakh or more in a financial year, the information will be reported to the Income Tax Department. The bank or card company will report such large transactions, meaning these large expenses will now be under the tax department's scrutiny. Cash bills of ₹1 lakh or more can also be reported. This isn't a completely new rule; such a system existed before, but now it's being made clearer and more stringent. The purpose is to monitor large expenses and strengthen tax compliance.

Second Rule

Credit card statements can now be used as proof of address. Bills issued within the last three months will be valid and can be submitted as proof of address when applying for a PAN. This will provide significant relief to those who don't have traditional documents like electricity bills. However, the condition is that the statement must clearly indicate your correct and updated address.

Third Rule

Until now, only digital methods like net banking and debit cards were used to pay income tax. The new draft rules may also include credit cards as an electronic payment option. This means that in the future, you will be able to pay income tax using credit cards. This will provide additional convenience to taxpayers. However, banks may charge processing fees or interest when paying taxes using a credit card, which could increase the total cost. Therefore, be sure to understand the potential additional charges before using this facility.

Fourth Rule
If a company provides a credit card to its employee, certain rules apply to the expenses incurred. Personal expenses incurred by the company may be considered a "perquisite," or an additional benefit to salary, and may be taxable. However, if the expenses are solely for official purposes, such as business trips, meetings, or client entertainment, they are not taxable. The company is required to maintain accurate records of all expenses and may have to prove that the expenses were solely for official work. If the employee has paid some amount himself, that amount will be deducted from the total amount when calculating tax.

Fifth Rule
According to the new rules, providing a PAN will be mandatory for obtaining a credit card from any bank or financial institution. Applications without a PAN will not be accepted. This aims to link large transactions with the Income Tax Department and prevent fraudulent or anonymous expenses.

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