Need help/Suggestion regarding Credit cards and Income tax related questions.

AgentBane

AgentBane

Level D
Hi All,

I have few questions regarding credit card and income tax related things tried talking to couple of friends but always get mixed reviews and very much confused on these questions.

  1. So I have 3 Credit cards which I use on day to day basis one for my father and 2 for my personal use . I see that one of the card does not give any benefits but only use it for points so If I cancel that card and take another one will my credit score decrease ? I have recently taken home loan got to know that credit score if above 800+ which is good so all I want to is to safeguard this score . Please tell me if cancelling credit card and taking new one will diminish the credit score ?
  2. This is regarding Income tax stuff , my brother works on 2 jobs 1 main job & another freelance thing . In our case my bro get his freelance money as Inward remittance like normal bank transfer from his client and he has to take care of the tax . We would like to know how do you guys show / file tax for freelance and Is there any way to reduce the tax ?
 
1. No, cancelling credit cards with all dues cleared won't affect your score.
2. Show as income from other sources at the year end when filling ITR. Might have to pay late fees along with tax applicable, not 100% sure on this. Also can show/declare when his company asks for the same when filling Income tax declaration form at start of FY or proofs when filling in Jan 2023. Taxes would then be adjusted accordingly for the last couple months of the FY by the company.
 
AgentBane said:
Hi All,

I have few questions regarding credit card and income tax related things tried talking to couple of friends but always get mixed reviews and very much confused on these questions.

  1. So I have 3 Credit cards which I use on day to day basis one for my father and 2 for my personal use . I see that one of the card does not give any benefits but only use it for points so If I cancel that card and take another one will my credit score decrease ? I have recently taken home loan got to know that credit score if above 800+ which is good so all I want to is to safeguard this score . Please tell me if cancelling credit card and taking new one will diminish the credit score ?
  2. This is regarding Income tax stuff , my brother works on 2 jobs 1 main job & another freelance thing . In our case my bro get his freelance money as Inward remittance like normal bank transfer from his client and he has to take care of the tax . We would like to know how do you guys show / file tax for freelance and Is there any way to reduce the tax ?
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1. That depends. If your other accounts (loans/cards) had overdues or missed payment dates etc registered in CIBIL and if your unused card was always clean, your credit score will decrease when you close this card. This happened for me. I was using Amex Gold charge card and many times I cleared dues way past due date (was not aware that those are reported to CIBIL) many years ago. My loan account was absolutely clean throughout. When I closed my loan account last year, my credit score fell by 20 odd points. CIBIL works in mysterious ways. I took me almost a year to get back to that previous score. Now, if you have taken home loan already and if you have no plans to take another loan in a year or two (and no plan to shift home loan to another bank), close the card. If you have plan to take another loan, dont try anything as you have a very good cibil score.

2. If you know a good CA who does IT filing and returns, take his/her help. My suggestion is to show the revenue in tax filing else it can be a problem later if your brother's accounts are scanned by IT department (they usually do this at random I believe).
 
desiibond said:
1. That depends. If your other accounts (loans/cards) had overdues or missed payment dates etc registered in CIBIL and if your unused card was always clean, your credit score will decrease when you close this card. This happened for me. I was using Amex Gold charge card and many times I cleared dues way past due date (was not aware that those are reported to CIBIL) many years ago. My loan account was absolutely clean throughout. When I closed my loan account last year, my credit score fell by 20 odd points. CIBIL works in mysterious ways. I took me almost a year to get back to that previous score. Now, if you have taken home loan already and if you have no plans to take another loan in a year or two (and no plan to shift home loan to another bank), close the card. If you have plan to take another loan, dont try anything as you have a very good cibil score.

2. If you know a good CA who does IT filing and returns, take his/her help. My suggestion is to show the revenue in tax filing else it can be a problem later if your brother's accounts are scanned by IT department (they usually do this at random I believe).
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Think I am not going to take any loan anytime soon and never have missed any payments on credit cards. The only option which I see is close the card for safe side and move on for now .
 
AgentBane said:
Think I am not going to take any loan anytime soon and never have missed any payments on credit cards. The only option which I see is close the card for safe side and move on for now .
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Then close it. You need not worry about rating in short term anyways. If it goes down a bit, it will shoot as you keep making those loan EMI payments. I doubt if it will go up as your current dues are calculated against reduced total limit after you close this card and it will show that your credit due % is higher.
 
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