Credit Card Tips: Lending through a credit card can be costly, know here..

Many times, we use credit card payments to help friends. Whether it's booking a flight ticket or buying a laptop, the friend promises to return the money immediately. But if this becomes a habit, the Income Tax Department may consider it not just a simple favor but a source of income. This means that if you're repeatedly making payments for others and receiving repeated refunds, the tax department may notice you.

When does small help become a tax risk?
Let's say Rahul buys a laptop worth ₹75,000 for his friend Ajay, and Ajay returns the money the next day. This is fine for a couple of times, but if Rahul repeatedly does this, paying large sums to different friends and later withdrawing the money, this pattern begins to resemble income. Banks are required to report to the tax department information about individuals whose annual credit card spending exceeds ₹10 lakh. An investigation can also be initiated if a person pays more than ₹1 lakh in cash. In such a situation, tax officials will want to know the source of the money repeatedly coming into your account – whether it's hidden income.

Avoid these mistakes, or your problems will increase.
Even if you prove the money belonged to friends, it's your responsibility to answer questions. Tax investigations involve time, documentation, and sometimes even the risk of penalties. The safest approach is to conduct every transaction through traceable banking channels like UPI, NEFT, or IMPS. Never accept payments or repayments in cash. If you must provide a significant amount of help to a friend, keep a written agreement or email confirmation to prove the authenticity of the transaction.

Don't turn your credit card into a "mini bank"
It's okay to help friends occasionally, but turning it into a habit or business can be dangerous. Frequent and large transactions can raise tax officials' suspicions. Remember, the Income Tax Department looks only at the flow of money, not friendship. Therefore, it's best to exercise caution and maintain a clean financial image so that a "friendly swipe" doesn't turn into a tax hassle. Helping friends is a good thing, but never ignore tax rules. It's wise to keep every transaction transparent and avoid using your card as a "lending bank" for others.

Disclaimer: This content has been sourced and edited from News 18 hindi. While we have made modifications for clarity and presentation, the original content belongs to its respective authors and website. We do not claim ownership of the content.