Hey there! Wondering if swiping your credit card for over ₹10 lakhs in a year could land you with extra taxes? You’re not alone, many people have the same concern, especially with the Income Tax Department keeping a close eye on big-ticket spending. Let’s break it down in simple terms according to the latest 2025 regulations, so you can get the facts without all the confusion

The Short Answer: No Direct Tax on Spending

First, the good news: just swiping more than ₹10 lakhs on your credit card does not necessarily mean you owe tax. In India, taxes depend on your income, not the amount you spend. So, shopping, travel or paying bills on your credit card, whether it is ₹10 lakh or more—won’t place a tax notice on those expenses themselves. Whew, isn’t it?

But here’s the catch: The Income Tax Department watches high-value transactions like these to make sure your spending matches your income. If it looks like you’re spending way more than what you’ve reported as income, they might knock on your door with questions. Let’s dig into how this works.

Why ₹10 Lakh Matters: The Tax Department’s Radar

When your aggregate credit card expenditure exceeds ₹10 lakh in a year (April 1 to March 31), banks are required to report it to the Income Tax Department. This is done as part of something known as the Statement of Financial Transactions (SFT), reported through Form 61A. It’s not that you have to pay tax on the expenditure—it’s merely a means for the tax authorities to verify whether your expenditure is commensurate with the income you’ve reported in your Income Tax Return (ITR). For example:

• If you earn ₹5 lakh a year but spend ₹15 lakh on your credit card, the tax department might wonder, “Where’s this money coming from?” They could send you a notice asking you to explain.

• If your spending matches your income (say, you earn ₹20 lakh and spend ₹12 lakh), you’re usually in the clear, as long as you’ve filed your ITR properly.

Special Cases: When Spending Might Raise Flags

There are a couple of situations where credit card transactions over ₹10 lakh could lead to tax related scrutiny. Let’s keep it simple:

1. Paying Your Credit Card Bill with Cash:
   • If you pay off ₹1 lakh or more of your credit card dues in cash during the year, banks report this to the tax department. Why? Cash payments can look suspicious, like you’re hiding income.
   • Even worse, if you pay ₹10 lakh or more to settle your credit card bill (in any way—cash, cheque or digital), that gets reported too. This doesn’t mean you owe tax, but you might need to show where the money came from.
2. Big Single Purchases:
   • If you make a single purchase worth ₹10 lakh or more on your credit card (like buying a fancy car or jewelry), this gets flagged separately. Again, it’s not taxed directly, but you’ll need to prove the money was legit—like from your salary, savings or a loan.
3. International Spending:
   • If you use your credit card abroad, there’s a thing called Tax Collected at Source (TCS). For 2025, if you spend over ₹10 lakh in a year on foreign transactions (like travel or online shopping from international websites), your bank collects 20% TCS on the amount above ₹10 lakh. For example, if you spend ₹12 lakh abroad, you’ll pay 20% TCS on ₹2 lakh (that’s ₹40,000).
   • The good news? This TCS isn’t an extra tax—it’s like an advance payment. You can claim it back as a credit when you file your ITR, adjusting it against your total tax liability.

How to Avoid Tax Trouble

Nobody wants a notice from the tax department, right? Here are some easy tips to keep things smooth if you’re spending over ₹10 lakh on your credit card:

• File Your ITR Honestly: Always report your income accurately, including salary, business profits or other sources like investments. If your spending matches your declared income, the tax folks won’t bat an eye.
• Avoid Big Cash Payments: Try to pay your credit card bills digitally—through net banking, UPI or cheques. Cash payments over ₹1 lakh can raise red flags.
• Keep Records: Retain receipts or bank statements of major purchases, particularly if they exceed ₹10 lakhs. When questioned by the tax authority, you may present your money being from valid sources, such as savings or borrowing.
• Describe Mismatches: If you incurred a high expense due to an unusual event (such as the sale of property or receiving a gift from relatives), state so in your ITR. Parental or close relative money is not taxed as income, so you are protected if you account for it.
• Check Your AIS: The Annual Information Statement (AIS) on the income tax portal shows all your high-value transactions, including credit card spends over ₹10 lakh. Look at it before filing your ITR to make sure everything matches.

A Quick Example to Clear Things Up

Let’s say Priya spends ₹15 lakhs on her credit card in 2025-26:

• She buys clothes, gadgets and books worth ₹8 lakhs in India.
• She spends ₹7 lakh on a trip abroad to Europe.
• Her income is ₹18 lakh and she files her ITR correctly.

Here’s what happens:

• The bank informs her ₹15 lakh spending to the tax department because it’s above ₹10 lakhs.
• For her foreign trip of ₹7 lakh, no TCS is applicable because it’s below the ₹10 lakh limit for global expenses.
• Because her expenses (₹15 lakh) are lower than her income (₹18 lakh) and she’s accounted for all this in her ITR, she doesn’t have to pay additional tax. The tax authority finds her expenses reasonable and leaves her alone.

Now, if Priya reported only ₹5 lakh income but spent ₹15 lakhs, she may receive a notice saying, “Where’d you get the cash?” If she has no explanation (e.g., stating it was a loan or gift with support), the tax department can consider the additional ₹10 lakhs as “unexplained income” and tax it at a higher rate (up to 60% with penalties). Yikes!

What About AMT and Section 115JD?

Because you inquired about Section 115JD previously, let’s put two and two together. The Alternate Minimum Tax (AMT) hits non-corporate taxpayers (such as individuals or partnerships) who take certain deductions, so their normal tax is low. AMT is determined at 18.5% of your adjusted income and you’re entitled to a credit for additional AMT paid under Section 115JD to apply in later years.

Does this have anything to do with credit card purchases? Not exactly. AMT applies depending on your income and deductions, not your purchases. But if you’re making purchases in excess of ₹10 lakh and taking large deductions (such as business-related expenses) to reduce your tax, AMT may apply. The Section 115JD tax credit could then save you down the line, but it won’t affect whether your credit card purchases invite scrutiny.

Also Read : Understanding Tax Credit Under Section 115JD: A Simple Guide for 2025

Why This Matters in 2025

In 2025, the tax authorities are leveraging technology such as the AIS to monitor expenses better than ever. With credit card purchases in excess of ₹10 lakh reported automatically, they’re verifying whether you’re living life in the fast lane to identify tax dodgers. This doesn’t imply you’ll be taxed for spending, it simply implies you must be prepared to prove your money is clean.

For folks like freelancers, business owners or high earners, big credit card spends are common. Maybe you’re paying for a wedding, a big vacation or business supplies. As long as your ITR reflects your income and you’ve got backup for your funds, you’re golden.

Final Thoughts: Spend Smart, Stay Worry-Free

Spending more than ₹10 lakh on your credit card won’t land you with tax liability simply because you swiped so much. Taxes are a matter of income and not expenditure. But large spends can draw attention from the tax department, so keep your ITR accurate, don’t use cash for bill payments and retain records of large spends. When abroad, be mindful of that 20% TCS on overseas spends over ₹10 lakh—you can recover it later.

Imagine this: your credit card is a convenient tool, but handle it carefully. If your expenditure tells a story consistent with your earnings, you’re good to go. Planning a big purchase or anxious about a notice? Speak to a Chartered Accountant to double-check—they’ll set you on the right path.