In India, Diwali, like other festivals, is a time for joy, celebration, and increased spending. People should be aware of the possible tax ramifications of credit card spending when people shop, exchange gifts, and take part in cultural events.
As per further information, following are some ways to figure out the tax calculations on credit card spending during the festive season:
One common tax linked to credit card spending in India is the Goods and Services Tax (GST). Levied on the supply of goods and services, GST is an indirect tax. It all depends on what kind of goods or services you buy as to what GST rate applies. How much GST is due on the purchases you make with a credit card? Following are some ways to calculate GST on credit card spending:
Ø Identifying GST Rate – Determining the GST rate that applies to the particular good or service that a person has purchased. GST rates can be as high as 28% for certain luxury goods or as low as 5% for other goods.
Ø Calculating the GST Amount – Multiplying the entire cost of the purchase by the GST rate. A person will then be able to see how much GST is due. For instance, at a 12% GST rate, a person would owe ₹600 in GST if he/she has spent ₹5,000 on gifts.
· Interest Charges
Another financial factor associated with credit card spending is interest charges. Interest is applied to the amount a person owes on his/her credit card when he/she carries a balance from one billing cycle to the next. While not a tax, high interest rates can make the expenses go up a lot.
Following are the ways to calculate interest charges:
Ø Outstanding Balance – A person can determine the balance due on the credit card at the start of each billing cycle.
Ø Annual Percentage Rate (APR) – Recognizing the annual percentage rate (APR), or the interest rate assessed on the credit card. The monthly interest rate is typically computed by dividing this rate by 12.
Ø Monthly Interest – The interest charged for that billing cycle can be calculated by multiplying the outstanding balance by the monthly interest rate.
Following are some of the ways of tax efficient spendings by credit cards this festive season:
· Deductions on Tax – Depending on the budget, a shopper may be able to claim tax credits or deductions. A person should know tax laws and speak to a tax consultant to find out if tax credit can be claimed for festival-related shopping.
· Maintaining Records – Keep meticulous records of all your festival-related costs, from receipts to invoices, so a shopper can make sure his/her taxes and deductions are correct.
· Knowing About Rewards – Understand everything about rewards & cashback on credit card spendings.
Festival season is a time to treasure customs, fortify bonds, and make enduring memories. This includes Diwali and other celebrations. While using credit cards may result in a number of tax ramifications, such as interest charges, income tax on rewards, and GST, being aware of the financial situation and taking proactive steps to manage it will help enjoy the holidays to the fullest while minimizing your tax obligations.