Paying Income Tax with credit card: Benefits, disadvantages and process

The method allows the tax department to process your payment promptly, potentially updating your tax records faster

The government has in recent years taken steps to simplify the tax payment process for citizens. One such initiative is the option to pay Income Tax using credit card. Let us understand how this is done:

 

“Using a credit card to pay your income tax can be a smart move, particularly if you are looking to earn reward points, manage your cash flow, or take advantage of interest-free periods. However, it's essential to weigh the pros and cons,” said Swapnil Patni, a chartered accountant.

 

Pros of paying Income Tax with a credit card

 

Convenience: One of the most significant benefits of using a credit card for tax payments is the ease of the process.

 

Potential rewards: Many credit cards offer rewards such as cashback and points. HDFC BizBlack and HDFC BizPower credit cards are offering rewards for tax payments.

 

Interest-free period: Most credit cards provide an interest-free grace period for new purchases. If taxpayers time their tax payments correctly using credit card, they can take advantage of this period to manage their cash flow better.

 

EMI options: Some credit cards allow users to convert large transactions into EMIs. This feature can ease the financial burden.

 

“While credit card payments offer convenience and potential rewards, be mindful of the interest rates if you don't pay off the balance in full. The processing fees, typically around 2 per cent of the transaction amount, can also add up. Always review the terms and conditions of your credit card provider to understand the costs involved,” Patni said.

 

How to pay Income Tax using credit card:

 

To initiate the payment process, taxpayers must first generate a challan after submitting their Income Tax return.

 

This challan will detail the tax amount and be assigned a unique serial number.

 

Visit the official tax payment portal.

 

Navigate to the tax payment section.

 

Choose the ‘Pay Tax’ option.

 

Select ‘Credit Card’ as your payment method from the available options.

 

Input the relevant challan details.

 

Enter your credit card information, including the card number, expiry date, and CVV code.

 

Confirm the transaction.

 

Upon successful payment, you will receive a confirmation message via email and SMS on your registered e-filing portal credentials.

 

Limitations and considerations

 

Despite the convenience, there are limitations to be aware of. For instance, the Income Tax Department does not allow scheduling tax payments via credit card, meaning payments must be made immediately. Additionally, there is a time limit of 15 days from the generation of the challan to complete the payment.