Big Tax Alert! high-value Credit Card transactions under Income Tax Radar from April 1,2026

From April 1, 2026, the Income Tax Department will implement the Draft Income Tax Rules 2026, replacing the old 1962 framework and bringing tighter digital monitoring of high-value credit card transactions. This does not mean a new tax on every swipe, but it does mean stricter automated reporting and closer scrutiny of spending that does not match declared income.

Banks will be required to report credit card payments of Rs.1 lakh or more made in cash in a financial year, as well as total annual credit card bill payments exceeding Rs. lakh, through the Statement of Financial Transactions (SFT). If a person’s credit card spending appears significantly higher than their declared income, the system may flag it for inquiry, potentially leading to a notice under Section 142(1) seeking an explanation of the source of funds.

The department is also cracking down on “manufactured spending,” such as rotating money through friends or relatives to earn reward points or artificially inflate transactions; such cases, if found to lack genuine economic substance, may be treated as unexplained expenditure under Section 69C and taxed heavily with penalties. PAN disclosure is now mandatory for credit card applications, and recent credit card statements can be used as address proof for PAN purposes.

Additionally, employer-provided credit cards used for personal expenses may be treated as taxable perquisites unless strictly used for official purposes with proper documentation. In simple terms, the new rules aim to digitally match lifestyle spending with reported income, making transparency essential and leaving little room for unexplained high-value transactions.