Pay income tax with a credit card? Check which cards offer rewards and if it’s worth it

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• Paying income tax by credit card incurs processing fees and GST.
• Rewards may not offset fees; check if your card offers benefits.
• UPI and net banking are usually cheaper for most taxpayers.

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March 15 is the last day to pay the final instalment of advance tax for FY 2025–26. Taxpayers whose estimated tax liability exceeds Rs 10,000 must ensure timely payment to avoid interest charges on the outstanding amount.

There are many ways to pay income tax, and using a credit card may sound like an easy way to earn reward points or unlock spending milestones. But the option also comes with transaction charges and the risk of steep interest if the credit card bill is not cleared on time.

With the income tax department’s e-pay tax facility allowing credit card payments through multiple gateways, taxpayers now have the choice of using their cards to settle tax dues. The key question, however, is whether the rewards and benefits offered by credit cards are enough to offset the processing fees involved.

Credit cards that may offer benefits on tax payments

Some premium or business credit cards offer reward points or milestone benefits that could partially offset transaction costs. However, the actual benefits depend on whether the card issuer counts government payments toward rewards or spending milestones.

Which card networks are accepted

Not all credit cards can be used to pay income tax.

Most major credit card networks can be used to pay income tax through the e-pay tax facility. Cards issued on Visa, Mastercard and RuPay networks are widely accepted across payment gateways. American Express cards may also be used, but their acceptance can be limited to specific gateways such as Canara Bank.

As a result, experts say taxpayers using American Express cards may need to check whether the selected payment gateway supports the network before proceeding with the transaction.

Transaction charges for credit card tax payments

When paying taxes with a credit card, the payment gateway levies a processing charge on the transaction value. GST of 18% is applicable on these charges.

For instance, a tax payment of Rs 10,000 through a gateway charging 0.85 percent would attract a fee of around Rs 85 plus GST, taking the total processing cost to roughly Rs 100.3.

Here are the indicative transaction fees charged by some payment gateways.

Now, other credit cards can also be used to pay income tax through the e-pay portal, but they may not offer reward points or additional benefits on such transactions.

When does paying income tax by credit card actually make sense?

Using a credit card to pay taxes can work for some cardholders, but only in specific situations. The biggest factor is whether the rewards or benefits earned are higher than the transaction fee charged by the payment gateway.

Ankur Mittal, co-founder of Card Insider, says, “Paying income tax with a credit card makes the most sense for individuals who hold premium or business credit cards, as these cards are more likely to offer rewards or milestone benefits on such payments.”

He adds, “Most regular credit cards either exclude tax payments from rewards or offer very limited benefits. However, for cardholders trying to achieve spending milestones or unlock annual benefits, tax payments can help reach those thresholds faster.”

In practice, the strategy tends to work in three situations:

• When rewards exceed the gateway fee

If the effective reward rate on a card is higher than the payment processing charge, typically around 0.7 percent to 1 percent, cardholders may still come out ahead.

• When large payments help unlock milestone benefits

Many premium cards offer bonus points, travel vouchers or statement credits after reaching spending thresholds. A large tax payment can help cardholders cross those limits faster.

• When short-term liquidity is needed

Credit card payments provide an interest-free window until the statement due date, which can help manage short-term cash flow.

Do the rewards really offset the fees?

Before using a credit card for tax payments, cardholders should carefully evaluate whether the benefits actually justify the cost.

Mittal points out, “Taxpayers should always factor in the payment gateway or processing charges when making tax payments with a credit card. If the value of the rewards or milestone benefits earned from the transaction exceeds the gateway fee, then using a credit card can be worthwhile.”

However, he cautioned that cardholders should read the fine print.

He explains, “In many cases, tax or government payments may either earn reduced rewards or be excluded entirely. Users should confirm whether such transactions are eligible for rewards or counted toward milestone spends.”

Using a credit card for tax payments may not work

For many taxpayers, using a credit card to pay income tax may offer little benefit.

No rewards on government payments: Several credit cards exclude government transactions from reward programmes. In such cases, the taxpayer pays the transaction fee without receiving any benefits.

High interest on unpaid balances: If the credit card bill is not cleared in full by the due date, interest rates, often exceeding 30-40 percent annually, can quickly wipe out any rewards earned.

Cheaper payment options available: Payments through UPI or net banking generally do not attract any transaction fee, making them the more economical choice for most taxpayers.

How to pay income tax using a credit card

Tax payments through a credit card can be made through the income tax department’s online e-pay tax facility. Here’s how you can do it;

• Visit the income tax e-pay portal.
• Enter your PAN and registered mobile number to receive a one-time password (OTP).
• Choose the tax category, such as advance tax or self-assessment tax.
• Select the assessment year and enter the amount payable, including surcharge, cess, interest, or penalties if applicable.
• Choose the payment gateway option and proceed.
• Select a credit card as the payment method and enter the card details.
• Authenticate the payment through OTP to complete the transaction.

The bottom line

Paying income tax with a credit card can help some taxpayers earn rewards, unlock milestone benefits, or manage short-term liquidity. But the strategy works only when the value of those benefits exceeds the processing charges involved.

For most taxpayers, especially those whose cards do not reward government payments, UPI or net banking remain the simpler and more cost-effective payment options.