New Credit Card Rules Effective From April 1: Income Tax Department Introduces Major Changes

New Credit Card Rules: As digital transactions continue to surge across India, extending beyond metro cities to Tier-2 and Tier-3 regions, the Income Tax Department is gearing up to introduce significant regulatory changes. Aimed at enhancing transparency and monitoring high-value transactions, the new ‘Draft Income Rules 2026’ proposes several modifications regarding credit card usage effective from April 1, 2026. These changes are set to impact taxpayers and cardholders directly.

Stricter Monitoring on Transactions

The proposed draft seeks to replace the older regulations of 1962 with modern provisions to track significant expenditures more effectively.

• High-Value Bill Payments: If an individual pays credit card bills exceeding ₹10 Lakh in a single financial year using non-cash modes (such as UPI, Bank Transfer, or Cheque), the bank or card issuer will be mandatorily required to report this transaction to the Income Tax Department.
• Cash Payments: While similar provisions existed earlier, the new rules reinforce that any credit card bill payment of ₹1 Lakh or more made in cash must also be reported to the tax authorities.

Mandatory PAN and Address Proof Norms

To curb financial irregularities, the link between credit cards and PAN cards is being strengthened.

• No PAN, No Card: Under the proposed rules, financial institutions and banks will be prohibited from issuing new credit cards unless the applicant provides their PAN details. This makes PAN mandatory for acquiring a credit card.
• Statement as Proof: On the flip side, for those applying for a new PAN card, a credit card statement can now be submitted as valid proof of address. However, the statement must not be older than three months to be accepted.

Corporate Cards and Employee Taxation

A significant change is anticipated for employees using corporate credit cards. If a company issues a credit card to an employee and covers expenses such as annual fees or membership charges, this amount will be treated as a ‘Perquisite’. Consequently, it will be added to the employee’s taxable income. However, tax can be exempted if the company maintains proper records proving that the expenses were incurred exclusively for official business purposes.

Additionally, to promote digitalization, the draft rules recognize credit cards, debit cards, and net banking as official electronic modes for paying income tax, offering taxpayers more flexibility and reducing reliance on physical payment methods.

Disclaimer: This article is for informational purposes only and does not constitute financial advice. Please consult with a tax expert or financial advisor before making any investment or tax-related decisions.