India's tax department uses AI to spot credit card 'money rotation'
India's Income Tax Department is now using AI to scan your credit card spending and match it with your tax returns.
They're especially looking for "manufactured spending"—basically, when people rotate money through cards just to rack up reward points.
If the numbers don't add up, these are flagged as unexplained income under the law.
How does this AI actually work?
The system checks for odd patterns, like spending ₹10 lakh a year while reporting only ₹6 lakh income, or making rent payments to friends via apps and getting the money refunded.
It pulls data from banks and payment platforms—over 6.5 billion transactions—to catch anything fishy, all without old-school in-person checks.
What happens if you get flagged?
If their AI notices something off, you might get an online notice or be part of an e-campaign asking for explanations.
For example, someone in Chennai was hit with a ₹1.12 crore demand after rotating nearly ₹69 lakh without filing returns since 2021.
Also, if you receive more than ₹50,000 in cashback or rewards in a year, and these are monetized (e.g., as statement credits or cash), they may be treated as taxable income under 'Income from Other Sources.'
So it's smart to keep records of invoices and reimbursements just in case!