Why your company credit card could trigger a tax notice – Money News | The Financial Express

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Using a company credit card for personal expenses? New Income Tax draft rules say it may be treated as a taxable perquisite. Here’s when a tax notice can arise and how to avoid it.

As per the rules, any expense incurred by an employee on a credit card provided by the employer may be taxable.

The Income Tax draft rules have defined how expenses made using employer-provided credit cards are treated for tax purposes. Employees who use company-issued credit cards for personal spending may have to pay tax on those amounts. This applies to expenses made for household purposes as well. Such expenses are considered as “perquisite” under the existing tax regulations.

As per the rules, any expense incurred by an employee on a credit card provided by the employer may be taxable. The same applies to expenses made by a member of the employee’s household. If the employer later pays or reimburses these expenses, the amount may be added to the employee’s taxable income.

This means, if your company has paid for your holiday to Mauritius or given you a club membership, you will be liable to taxes. Same is the case with company credit cards.

When credit card expenses become taxable

According to the provision, “The perquisite value in respect of expenses incurred by the employee or any of his household members, which are charged to a credit card provided by the employer, which are paid or reimbursed by such employer to an employee shall be taken to be such amount paid or reimbursed by the employer.”

This means that if an employee uses the company credit card for personal purchases and the employer settles the bill, the total amount paid by the employer will generally be treated as a taxable benefit in the hands of the employee.

Exception for Official Use

However, the rules also provide relief in certain cases. No perquisite value will be taken if the expenses are incurred wholly and exclusively for official purposes and certain conditions are met as mentioned in Rules.

In simple terms, the credit card must be used strictly for work-related expenses. This includes travel, client meetings, or other official duties. Proper documentation must be maintained as per the prescribed conditions. If these rules are followed, the amount will not be treated as a taxable benefit.

Employees should maintain clear records of official spending and avoid mixing personal expenses with business payments on employer-issued credit cards. Failure to do so could lead to higher taxable income and additional tax liability during assessment.