Mandatory Electronic Payment of Tax Under the Direct Tax Code — Who Must Comply

The Income Tax Act, 2025 and the Income Tax Rules, 2026 reinforce the emphasis on digital compliance by mandating electronic payment of tax for specified categories of taxpayers. Rule 333 of the Income Tax Rules, 2026 specifies the categories of persons who must pay tax electronically.

The Regulatory Framework

Rule 333 of the Income Tax Rules, 2026 provides that the following persons shall pay electronically the tax, interest, fee, and penalty:

• Companies: All companies, without exception
• Persons covered by tax audit: Non-corporate taxpayers to whom the provisions of section 63 (tax audit) are applicable

What "Pay Electronically" Means

"Pay electronically" means payment by way of:

1. Internet banking facility of the authorised bank
2. Credit or debit cards

The rules also include Central Bank Digital Currency (CBDC) as an accepted mode of electronic payment.

Voluntary Electronic Payment

Persons not covered in the mandatory category can voluntarily pay their tax by using the e-payment mode. E-payment saves time and efforts compared to traditional payment methods.

Scope of "Tax"

For the purposes of Rule 333, "tax" has the meaning assigned to it in section 2(106) of the Act. This includes:

• Income-tax payable under the Act
• Surcharge, if any
• Cess, if any
• Any other sum payable under the Act

Payment Modes

Challan-based Payment

Tax can be paid electronically through challans:

• ITNS 280: For payment of income-tax and corporate tax
• ITNS 281: For payment of TDS/TCS by corporate and non-corporate deductors/collectors

Internet Banking

Taxpayers can make payments through the internet banking facility of authorised banks. The payment is credited to the Central Government account and the challan is generated electronically.

Credit/Debit Cards

Credit and debit cards are accepted for tax payments. The payment is processed through the payment gateway and the challan is generated electronically.

Central Bank Digital Currency (CBDC)

CBDC has been included as an accepted mode of electronic payment. This is a significant development, reflecting the government's push for digital currency adoption.

Consequences of Non-Compliance

Assessee in Default

If a person required to pay tax electronically fails to do so, they may be treated as an assessee in default. All provisions of the Act relating to recovery of tax apply.

Interest and Penalty

Non-compliance may attract interest under section 411(3) and penalty under section 412 of the Act.

Disallowance of Expenditure

In certain cases, failure to make payment through prescribed electronic modes may result in disallowance of expenditure under section 36(4) and (5).

Practical Considerations

For Companies

Companies must ensure that all tax payments—including advance tax, self-assessment tax, TDS, TCS, and any other tax payments—are made electronically. The company's authorised signatories must be registered for internet banking or have access to credit/debit cards for tax payments.

For Non-Corporate Taxpayers Covered by Audit

Non-corporate taxpayers covered by tax audit under section 63 must ensure electronic payment of all taxes. This includes individuals, HUFs, firms, and other persons whose accounts are subject to tax audit.

For Voluntary E-Payers

Taxpayers not covered by the mandatory category can voluntarily use e-payment. E-payment provides several advantages:

• Convenience: Pay from anywhere, at any time
• Speed: Instant payment and generation of challan
• Accuracy: Reduced errors compared to manual payment
• Record Keeping: Electronic record of payment

Registration Requirements

Internet Banking

To pay tax through internet banking, taxpayers must:

1. Have an account with an authorised bank
2. Be registered for internet banking
3. Have the necessary login credentials

Credit/Debit Cards

To pay tax through credit or debit cards, taxpayers must:

1. Have a valid credit or debit card
2. Ensure the card is enabled for online transactions
3. Have sufficient credit limit or balance

Expert Legal Guidance

Understanding the mandatory electronic payment requirements is essential for tax compliance. Anuj Desai & Associates provides expert advisory services on Direct Tax Code compliance, helping taxpayers and businesses understand the electronic payment requirements and ensure timely and accurate tax payments.

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