Paying Income Tax Via Credit Card: Everything You Should Know!

We all love using a credit card for making payments and why not? For every purchase or bill settled with a credit card, we are rewarded with tons of rewards. But can you make Income Tax payments with a credit card and should you? There are many questions that arise about making Income Tax payments with a credit card and therefore we are here to assist you and enlighten you with information related to making Tax returns via credit card.

In this article, we are going to talk about the process of making Income Tax payments using a credit card and whether or not you should use your credit card for the same. To know more about the usage of credit cards for Income Tax Payments, keep reading.

Income Tax Payments via Credit Cards

Earlier, Taxpayers were able to make Income Tax payments only through NetBanking of some of the popular commercial Banks. However, with recent advancements, now the TaxPayers have multiple payment options like NEFT/RTGS, UPI, and Credit Cards. Making payments with a credit card carries a charge on the payment amount. Before we discuss that, let’s first understand the process of tax payments via credit cards.

How to Pay Tax via Credit Card?

Following are the steps that would assist you in making an Income Tax payment via Credit card:

• Visit the official portal of Incometax.gov. On the Homepage, you will find the Quick Links tab on the left side of your screen. Under the list, Click on E-pay

• In the next step, you would be required to enter your PAN Card Number along with your contact details. After that, you will be asked to enter the OTP received on your contact number.

• In this next window, select the 1st option of Income Tax and click the proceed button.
• Now you have to select the assessment year and the type of payment.

• In the next tab, you will be asked to amount of Tax to be paid, any surcharge, cess, interest, or penalty applicable to the tax amount. We have taken the tax amount as Rs. 10,000 as an example.

• Now for making the payment via credit card, select the Payment Gateway option and hit continue. Please Note that for making payment via Credit card, a transaction fee would be applicable on the transaction amount. The rate applicable depends upon the Gateway used.

• Review the details entered and check all the amounts whether they are correct or not. After doing the same, click on Pay Now button and agree to the terms and conditions.
• Next, select the payment option via credit card and then enter all the details of your credit card, Name, Card number, Expiry date, CVV, Mobile number, and Email. Once you are done, click on Pay and you will receive an OTP on your registered number which you have to enter to make the transaction.

• Note that credit cards issued with Visa, Mastercard, and Rupay network processors are acceptable for payments via credit cards. You won’t be able to make payments with an AmEx variant credit card.

Fees and Charges Applicable

Making Income Tax payments with a credit card attracts a certain transaction fee or payment charges. Earlier there was only one Payment Gateway (Federal Bank) which carried a transaction charge of 0.85% plus taxes. But now the cardholders have two more payment gateway options that carry a zero or little transaction charge. Following are the Payment Gateways available currently:

• Federal Bank: 0.85% plus taxes
• Canara Bank: 0.47%
• Kotak Mahindra Bank: NIL

It is obvious from above that making the Income Tax Payment through a credit card would be beneficial if the Kotak Mahindra Bank Gateway is selected.

Should you Pay Income Tax via Credit Cards?

The following mentioned points will help you deciding whether or not you should make Income Tax Payments via credit cards or not:

• Credit Card Rewards: One should use a credit card for making an Income Tax payment only if they are provided with the reward points on the transaction. If they do, then the effective reward rate on the card should be 2x or 2%. This is because the payment charges applicable on the credit card payments for income tax payments is 1.003% (0.85 plus 18% GST).
  Though there are other payment gateways available as well that charge a lower or no charge, but still the cardholder should be ready in case any of these gateways are not in service for the time being.
• Milestone Benefits: Another reason to make the payment via credit card should be that the cardholder is reaching the milestone spend and is getting the rewards associated with the credit card.
• Know the applicable charges: As mentioned above, the transaction processing charges applicable on credit card payments are 1.003% of the transaction amount. Therefore, taking the above example of Rs. 10,000 tax payment. The transaction charges on the same would be Rs. 100.3.
• High Interest on Unpaid balance: Interest charges applicable on credit cards are much higher than any other payment option. If you make the Income tax payment with a credit card and could not settle the card’s bill on time, then you will face heavy interest charges on the due amount.

Bottom Line

Making the Income Tax Payment via credit card is a good choice as it provides you with multiple days for paying back. Also, if your card’s reward rate or milestone benefit, outweighs the processing charges applicable then also it is worth going with a credit card. However, in any case, if you cannot pay back the amount, then you must not make the payment via credit card, or else you will face heavy interest rates. If you have any doubts regarding the same let us know in the comments below.