The shift from physical tax payments to digital transactions has made it easier for taxpayers to discharge their direct tax liabilities without visiting a bank. Under the Income-tax Act, 2025, taxpayers can make direct tax payments through electronic modes, while e-payment is mandatory for specified categories of taxpayers.
The Income Tax Department's reference document on E-Payment of Direct Taxes, containing provisions of the Income-tax Act, 2025 as amended by the Finance Act, 2026, explains who must pay taxes electronically, the available payment modes, the taxes that can be paid online and the steps involved in making an e-payment.
Two Modes of Paying Direct Taxes
The document broadly identifies two methods for payment of direct taxes:
- Physical mode - Payment by submitting the hard copy of the challan at a designated bank.
- E-payment mode - Payment through electronic methods.
While both modes are available in specified circumstances, certain taxpayers are required to use e-payment only.
Who Must Pay Direct Taxes Electronically?
E-payment is compulsory for:
- All companies
- All taxpayers other than companies who are liable to get their accounts audited under Section 63
Such taxpayers cannot choose the physical mode for payment of tax, interest, fees or penalty and are required to make the payment electronically.
Example: Company Tax Payment
The document gives the example of Essem Ltd., whose income-tax liability for tax year 2026-27 is ₹8.40 lakh. Since it is a company, it is required to discharge its income-tax liability through e-payment.
Example: Taxpayer Liable to Tax Audit
Mr. Raja, who is engaged in trading in food grains, has an annual turnover of ₹11.45 crore and wants to pay advance tax of ₹11.84 lakh. Since his turnover exceeds ₹10 crore, the document states that he is liable to tax audit under Section 63 and therefore must make the advance tax payment electronically.
E-Payment Rules Also Apply to TDS
The mandatory e-payment requirement is not restricted to income-tax or advance tax. The document specifically states that the provisions apply to forms of tax including:
- Advance tax
- Self-assessment tax
- Tax deducted at source (TDS)
For example, where a company deducts TDS from a brokerage payment, it must pay the TDS electronically.
Similarly, a non-corporate taxpayer who is liable to tax audit under Section 63 must also make TDS payments electronically.
When Is E-Payment Optional?
Not every taxpayer is required to make tax payments electronically.
A taxpayer who does not fall within the mandatory categories can voluntarily choose e-payment. The document highlights that electronic payment can save time and effort even where it is not compulsory.
For instance, the document considers a taxpayer with business turnover of ₹84 lakh who is not liable to tax audit under Section 63. Such a taxpayer can choose either physical payment or e-payment.
What Are the Available E-Payment Modes?
Under Rule 333 of the Income-tax Rules, 2026, tax can be paid online using:
- Net banking facility of an authorised bank
- Debit card
- Credit card
The taxpayer can also make an e-payment using another person's account if the taxpayer does not have the required payment facility. However, the payment must be made in the taxpayer's own name and PAN.
Where a credit card is used, the taxpayer has to select the Payment Gateway option. Additional transaction charges may apply over and above the tax amount.
Which Direct Taxes Can Be Paid Online?
The e-payment facility covers several categories of direct taxes, including:
- Income-tax
- Corporate tax
- Tax Deducted at Source (TDS)
- Tax Collected at Source (TCS)
- Securities Transaction Tax (STT)
- Commodities Transaction Tax (CTT)
- Other direct taxes
Therefore, the online payment facility is not limited to ordinary income-tax payments.
Important Details to Check Before Making Payment
Taxpayers should take care while entering challan details. The document highlights some important information that needs to be correctly provided.
For income-tax payments, the taxpayer's PAN should be correctly entered. For TDS or TCS payments, the deductor's TAN should be provided.
The taxpayer should also select the correct tax year and provide the correct address, PIN code, email ID and phone number.
Incorrect details can create avoidable complications, making it important to verify the challan information before completing the transaction.
How to Make E-Payment of Direct Taxes?
The Income Tax Department document provides the following broad process for making an online tax payment:
Step 1: Visit the Income Tax Portal
Go to the Income Tax Department's e-filing portal and select 'e-Pay Tax'.
Step 2: Select the Applicable Income-tax Act
Select the applicable law, namely the Income-tax Act, 2025 or the Income-tax Act, 1961, as applicable.
Step 3: Complete PAN/TAN Verification
Enter the PAN or TAN and mobile number for OTP verification. Enter the OTP received and proceed after confirming the PAN/TAN and taxpayer name.
Step 4: Select the Type of Payment
The taxpayer needs to select the appropriate payment category, such as:
- Income Tax
- Demand Payment as Regular Assessment Tax
- STT/CTT
- Self-Assessment Tax for Block Assessment
The taxpayer then selects the relevant assessment year or tax year and type of payment.
Step 5: Enter Tax and Other Amounts
Enter the applicable amount of tax, surcharge, cess and other relevant amounts. The portal then provides the available payment options, including net banking, debit card and credit card.
Step 6: Verify and Complete Payment
Before making the payment, the taxpayer should verify the challan details. Once the transaction is successfully completed, the payment challan or receipt is generated and displayed on the screen.
Why E-Payment Is Useful for Taxpayers
Beyond being mandatory for specified taxpayers, e-payment offers practical advantages. The Income Tax Department describes the facility as time-saving, simple and safe, and notes that it can be used from anywhere.
For businesses, professionals and taxpayers regularly making advance tax, TDS or other direct tax payments, the electronic route can also reduce the need for physical visits and make payment records easier to access.
Key Takeaway
Under the Income-tax Act, 2025, all companies and non-corporate taxpayers liable to tax audit under Section 63 are required to make payments of tax, interest, fees and penalties through e-payment. Other taxpayers can choose e-payment voluntarily.
The facility covers income-tax, corporate tax, TDS, TCS, STT, CTT and other direct taxes, with payment possible through net banking, debit cards and credit cards under the prescribed framework.
As the document itself notes, its contents are provided for information and quick access and do not purport to be legal documents. Taxpayers should verify the applicable provisions from the relevant Government Acts, Rules and Notifications before relying on them.
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