New tax rules may change how you use your credit card

The proposed framework introduces stricter reporting of high-value credit card transactions, allows tax payments through cards, recognises statements as address proof for PAN, and mandates PAN for new card applications to strengthen compliance and transparency.

The Income Tax Department has unveiled the Draft Income Tax Rules 2026, outlining significant changes that could alter how credit cards are used and monitored in India. The proposed rules, which will replace the Income Tax Rules, 1962 after approval, aim to tighten oversight of financial transactions and improve tax compliance.

One of the key provisions focuses on enhanced reporting of high-value spending. Under the draft norms, banks and card issuers may be required to report annual digital credit card transactions exceeding Rs 10 lakh. Cash payments of Rs 1 lakh or more in a financial year could also come under scrutiny. While large transaction reporting already exists, the new rules seek to clarify and strengthen the framework to curb tax evasion.

Greater flexibility, stricter compliance

The draft also proposes accepting recent credit card statements — issued within the last three months — as valid address proof when applying for a Permanent Account Number (PAN), provided the document reflects an updated address. This move could simplify documentation for applicants lacking conventional proof such as utility bills.

In another notable shift, taxpayers may be allowed to pay income tax dues using credit cards. Currently, payments are largely limited to net banking and debit cards. While this option could offer convenience, users may incur additional charges or interest levied by banks.

The proposed rules further clarify the tax treatment of employer-issued credit cards. Personal expenses charged to company cards may be treated as taxable perquisites, whereas legitimate business expenses would remain exempt. Employers would need to maintain detailed records to substantiate official usage.

Additionally, furnishing a PAN would become mandatory when applying for a credit card, with financial institutions barred from processing applications without it. The measure is designed to link financial activity more closely with tax records.

If implemented from April 1, 2026, the draft rules could reshape the credit ecosystem, particularly for high-spending users, by increasing transparency and tightening regulatory oversight.