Should You Use a Credit Card For Income Tax Payment? Smart Strategy or Costly Mistake?

As the deadline to file income tax returns gets closer, many people rush to make last-minute payments. Most know they can pay using net banking, UPI, or debit cards, but fewer realize they can also use a credit card. This can be helpful for those low on cash or anyone who wants to earn reward points.

Credit cards are growing in India due to benefits like reward schemes, interest-free credit periods, and EMI options for large purchases, driving increased consumer spending and e-commerce growth. While many taxpayers use credit cards for their payments.

One of the CEOs said, “The Income Tax Department does not have an issue with you using your credit card to pay your tax. The payment gateway allows you all digital payment options, such as Net banking, UPI, and Debit and Credit Cards.”

People can pay income tax using credit cards through approved payment gateways connected to banks or card companies. But it’s essential to verify the rules and fees. Financial expert explains that not all credit cards give reward points for tax payments, and some gateways may charge extra fees.

The biggest benefit of using a credit card is flexibility. You can get up to 45 days of interest-free time, depending on your billing cycle. This can help if you’re short on money close to the tax deadline, letting you avoid late fees and penalties.

One of the cofounders says you should use a credit card for tax payments only if the rewards or benefits are more than the fees. In such cases, it can be a smart move.

Experts say your tax amount should fit under your credit limit and not push your credit usage too high. Using too much of your limit can damage your credit score over time. So, don’t stretch your finances; have a plan to repay the amount quickly.

If you don’t pay your full credit card bill and carry the balance, the interest charges can cancel out any rewards or benefits. In such instance, using net banking or UPI is affordable. But if you’re disciplined and can pay off your dues on time, using a credit card can give you extra time and peace of mind. Just make sure the benefits are worth the cost.