Can you use ₹13 lakh cash to pay credit card bill? This man tried and got I-T notice

A man in Shivaji Park in Mumbai received an income tax notice because he paid his credit card bill with ₹13.95 lakh in cash. The tax department issued a notice to him for the unexplained cash. What made the tax department suspicious was that he had filed an income tax return (ITR) of only ₹6.3 lakh.

The total credit card bill that he paid was ₹27.65 lakh, out of which ₹13.95 lakh was paid in cash. The income tax assessing officer asked him to explain the cash that he used to pay the bill since his income was too low to justify that.

So, he gave a reason that he received the cash from his family members in the form of a gift. He claimed that his family gifted ₹15.5 lakh in cash, and he used a portion of it ( ₹13.95 lakh) to pay the card bill. The man claimed that his wife gave him ₹3 lakh, his father gave him ₹8 lakh, and his mother gave him ₹4.5 lakh. 

The assessing officer was not satisfied with the explanation and asked him to give futher explanation. The matter escalated to the Income Tax Appellate Tribunal (ITAT), where the man received partial relief of ₹9.25 lakh, and the remaining was unexplained cash.

What are the money lessons we can learn from it?

1. Online transfer: Make a card payment through bank transfer instead of using cash. You can even make a payment through a cheque. 

2. Make regular payments: Avoid making bulk payments in one go. Either stagger your bill payment over a few months or pay the bill before the amount accumulates into a large sum. You could even pay the minimum due if you do not have the money to clear your dues. 

3. Expert advice: Speak to a tax expert or a chartered accountant to seek their professional advice before making any extraordinary payment.

4. More than one credit card: You could even keep multiple credit cards and use them for different purposes instead of using one card for all expenses. 

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