What is reported and what the thresholds mean
Credit card bill payments can be included in a Statement of Financial Transactions (SFT). The thresholds determine what the issuer reports. They do not cap card spending, create taxable income, or establish unexplained expenditure. Card purchases, amounts paid to settle a bill, and the card’s sanctioned limit are different figures.
| Item | Reporting trigger or treatment | What to reconcile |
|---|---|---|
| Card bills paid in cash | ₹1 lakh or more in aggregate in the financial year for the person’s cards with the reporting issuer. | Use cash receipts and card credits. SFT-006 is the legacy Form 61A card-payment code; SFT-005 is for time deposits. |
| Card bills paid other than in cash | ₹10 lakh or more in aggregate in the financial year for the person’s cards with the reporting issuer. | Use transfers, cheques, net banking and other non-cash settlement records. Test this aggregate separately from cash. |
| Foreign currency transactions | A separate reporting category. Under legacy Rule 114E, an authorised person reports the specified foreign currency transactions aggregating to ₹10 lakh or more, including qualifying card spending in foreign currency. The legacy code is SFT-011. | Do not treat foreign currency reporting as LRS or TCS treatment. Check the applicable rule and period. |
For FY 2025–26 and earlier periods covered by the 1961 Act, apply section 285BA and Rule 114E (Form 61A). For transactions in tax years beginning on or after 1 April 2026, apply section 508 of the 2025 Act and Rule 237 of the 2026 Rules (Form 165). The two card-payment thresholds are the same under Rule 237. The ordinary annual due date for these card statements is 31 May after the relevant financial year under the respective rules. For the legacy regime, section 271FA provides ₹500 per day of default, with ₹1,000 per day applying after the period specified in a section 285BA(5) notice expires, subject to the applicable provisions. These obligations concern the reporting entity.
Reconcile the Annual Information Statement
The Annual Information Statement (AIS) displays available source information. The Taxpayer Information Summary (TIS) summarises it by category. Neither is a complete transaction ledger. An issuer aggregates transactions it records for the person; PAN linkage does not create a combined report if no issuer has a reportable card total. Trace each payment to its actual funding source, such as salary credits, savings, asset-sale proceeds, loans or documented reimbursements, and consider the tax treatment of those sources separately. An apparent difference between annual settlements and taxable income does not by itself establish a notice or tax liability.
Four situations that need supporting records
- Company and personal cards. Identify the true beneficiary and purpose of each charge. A company’s payment of a personal expense cannot simply be deducted as an ordinary business expense. Depending on the relationship and facts, examine the employee perquisite rules or, for a qualifying shareholder, deemed dividend under the relevant Act. A properly documented employment benefit requires its own payroll and deductibility analysis. When staff or founders pay for business software, travel or advertising on personal cards, retain the underlying invoice, approvals, business purpose and reimbursement evidence.
- Payments for someone else. Tie together the merchant invoice, card charge, reimbursement and eventual bill settlement. A bank credit alone does not establish the nature of a reimbursement. Section 68 of the 1961 Act concerns sums credited in the assessee’s books; section 69C concerns the source of expenditure. Neither automatically applies to every unexplained-looking entry in AIS.
- Cash settlements. Maintain payment receipts and evidence explaining the availability of the cash on the relevant dates, such as a withdrawal trail or business cash records. Reporting is annual. The threshold is not a finding that the source was unexplained.
- Rent paid by card. Verify a genuine tenancy, actual payment to the landlord, receipts and eligibility for house rent allowance exemption under the applicable regime. A card payment route or rent receipt cannot establish eligibility for a fictitious arrangement. Evaluate any penalty under its own statutory conditions.
Six worked illustrations
These examples are hypothetical. The dated cases use the law applicable to FY 2024–25.
1. Salary and business travel reimbursements
Kunal’s FY 2024–25 taxable salary is ₹12 lakh. The issuer reports non-cash settlements of ₹18.50 lakh, comprising ₹4.20 lakh of personal charges and ₹14.30 lakh of official travel and other employer expenditure that it reimburses. The apparent gap against taxable salary is ₹6.50 lakh, but that comparison mixes different figures. Reconcile the ₹14.30 lakh with approvals, invoices and employer bank credits. Use actual net salary credits or other supported funds to explain personal payments. A documented reconciliation helps explain the source; it does not guarantee any particular assessment outcome.
2. Reimbursement for an emergency hospital payment
In August 2024 Vikram, who earns ₹7 lakh annually, charges ₹3.50 lakh for a friend’s father’s hospital treatment. Three days later his friend transfers ₹3.50 lakh by IMPS. Keep the hospital invoice in the patient’s name, both transfer entries, a signed factual confirmation and the card payment evidence. The advance and reimbursement match in amount, but demonstrate that they relate to the same transaction. There is no general requirement to obtain a private affidavit under section 131.
3. What an actual unexplained-expenditure addition could cost
A shopkeeper who reports ₹6 lakh of presumptive income in FY 2024–25 makes four cash payments totalling ₹4.50 lakh toward card bills. Cash reporting applies. Assume, after considering his explanation and evidence, that the full ₹4.50 lakh is separately determined to be unexplained expenditure under section 69C. This assumption is essential; neither the cash reporting entry nor presumptive taxation proves the addition.
| Component on the assumed addition | Working | Amount |
|---|---|---|
| Base tax under section 115BBE(1)(i) | ₹4,50,000 × 60% | ₹2,70,000 |
| Surcharge | ₹2,70,000 × 25% | ₹67,500 |
| Health and education cess | ₹3,37,500 × 4% | ₹13,500 |
| Tax on that amount | 78% of the addition | ₹3,51,000 |
| Separate penalty if imposed under section 271AAC | ₹2,70,000 × 10% | ₹27,000 |
| Tax plus potential penalty, before any interest | 84% of the addition | ₹3,78,000 |
Section 115BBE disallows deductions, allowances and loss set-off in computing that income. Section 271AAC has its own conditions and proviso, including protection to the extent the specified income was included in the section 139 return and the relevant tax was paid by the end of the previous year. The 78% in this example is tax, surcharge and cess, not the penalty. For tax year 2026–27 onward, use sections 105 and 195 of the 2025 Act. As amended by the Finance Act, 2026, the section 195 base rate is 30%, before any applicable surcharge and cess. Section 443 was omitted; amounts determined by the Assessing Officer under section 195(1)(b) can engage the misreporting provision under section 439. Do not carry the historical calculation into the new regime.
4. Reward points, vouchers, miles and cashback
A traveller earns 4 lakh points redeemable for ₹2 lakh in vouchers, receives ₹35,000 statement cashback and redeems 2.50 lakh airline miles. The voucher illustration implies ₹0.50 per point; that conversion does not value the miles or determine taxable income. A rebate that directly reduces the price of a personal purchase differs from a separate incentive, a reward provided by reason of employment, or a benefit from business or professional activity. Check who funded or provided the benefit, the terms, who retained it and the relevant valuation and tax rules. There is no universal exemption or automatic perquisite from the use of a corporate card.
5. Overseas spending and the return filing trigger
In FY 2024–25 a resident pays ₹14.50 lakh with an international credit card while physically overseas, on travel-related costs for his trip. Under CBDT Circular No. 10/2023 the inclusion of international card use while overseas in LRS was postponed, so those payments as stated did not attract LRS TCS. Do not extend the example to cards used from India, other remittance modes, or an overseas tour package; test those separately. If the full ₹14.50 lakh is expenditure for foreign travel, it exceeds ₹2 lakh by ₹12.50 lakh. The seventh proviso to section 139(1) requires a return from an otherwise non-filing person within its scope. This trigger is independent of LRS and TCS.
6. Sanctioned limit versus settlement
A card has a ₹20 lakh limit. The cardholder spends and pays ₹2.50 lakh by bank transfer during the financial year and has no other cards with that issuer. This is below the ₹10 lakh non-cash threshold. The ₹20 lakh limit does not count towards it. Cash payments, if any, would need a separate check.
Frequently asked questions
1. What if I pay ₹4 lakh by bank transfer to each of three issuers?
The combined amount is ₹12 lakh, but none of the three issuers individually meets ₹10 lakh on these facts. If all three cards were with one issuer, its ₹12 lakh aggregate would meet the threshold.
2. Are payments from a salary account still reportable?
Yes, if the reporting test is met. A ₹12 lakh non-cash payment to one issuer meets the threshold even if taxable salary is ₹25 lakh. Keep the bank trail. Reporting does not determine whether any further inquiry is made.
3. Can an employer deduct card reimbursements?
Consider the underlying expense. Under the 1961 Act, section 37(1) covers qualifying revenue expenditure incurred wholly and exclusively for business, subject to the restrictions there and other provisions. Maintain appropriate invoices and approvals. GST credit is a separate test.
4. How do I correct a wrong AIS entry?
Open AIS from the e-Filing dashboard or e-File menu, select the entry and submit the applicable feedback with accurate details. Save the acknowledgement and check the source response or modified value. If the issuer’s data is wrong, request that it check and, where appropriate, correct the source report. File an accurate return based on the supporting records.
5. What about insurance premiums, school fees or other purchases?
The ordinary card-payment SFT test is based on payments against bills. A merchant label alone does not establish a tax result. Retain the underlying receipts where relevant to a claim, reimbursement, or funding reconciliation.
6. How long should I keep statements and receipts?
There is no single retention period for all card users. For the 1961 Act’s reassessment limits as substituted with effect from 1 September 2024, section 149 distinguishes the ordinary three-year limit for a section 148A show-cause notice from three years and three months for a section 148 notice, measured from the end of the relevant assessment year. Longer limits of five years and five years and three months, respectively, require the statutory conditions and at least ₹50 lakh of escaped income or likely escaped income, as applicable. Check the relevant law and procedural facts, including transition, other recordkeeping rules and any open proceeding, before discarding the documents.
Sources
- Income-tax Rules, 1962: rule 114E
- CBDT Systems Notification No. 3 of 2018: Form 61A reporting codes and guidance
- Income-tax Act, 1961, including sections 37, 68, 69C, 115BBE, 139, 149, 271AAC, 271FA and 285BA
- Finance Act, 2025: surcharge and health and education cess
- Finance (No. 2) Act, 2024: substitution of section 149
- Income-tax Act, 2025, as amended: sections 105, 195, 439 and 508
- Finance Act, 2026: unexplained-income rate and penalty amendments
- Income-tax Rules, 2026: rule 237 and Form 165 reporting
- Income Tax Department: AIS and TIS FAQs
- CBDT Circular No. 10/2023: LRS and TCS treatment for the historical example