File Your Income Tax Return with Pay Later Option

Introduction

The Indian Income Tax Department has introduced several new features to enhance the taxpayer experience. One such feature is the “Pay Later” option, which allows individuals to file their Income Tax Return (ITR) before making the tax payment. Earlier, taxpayers could file their ITR only after paying the due taxes, which often caused inconvenience—especially for those awaiting salary credits or other sources of income.

This article helps you understand the Pay Later option and explains how you can use it to pay your income tax conveniently.

What Is the Pay Later Option?

The “Pay Later” option provided by the Income Tax Department of India is a taxpayer-friendly facility that simplifies the Income Tax Return (ITR) filing process. It allows taxpayers to file their ITR electronically without paying the tax liability immediately.

Unlike the traditional approach—where tax payment and return filing happen together—this option separates the two steps. It offers flexibility to taxpayers who may need additional time to arrange funds or plan tax-saving measures before making the payment. Most importantly, it helps taxpayers avoid late filing penalties by ensuring the ITR is filed within the due date.

Important Considerations When Using the Pay Later Option

Before opting for Pay Later, taxpayers should keep the following points in mind:

Usage Limitations:
The Pay Later option is applicable only for Self-Assessment Tax at the time of ITR filing. It cannot be used for payments such as Advance Tax or TDS.
Consequences of Non-Payment:
Taxpayers choosing this option may be treated as an “assessee in default” until the tax is paid. This may attract interest and penalties on the unpaid amount.
Payment Timeline:
While the Income Tax Department does not prescribe a fixed deadline, it is advisable to pay the tax within the same month of filing the ITR.
Assessment and Penalty:
After processing the ITR, an intimation notice will be issued mentioning the outstanding tax. It is recommended to clear the dues within 30 days of receiving the notice. However, there is still some uncertainty regarding the applicability of penal interest when opting for the Pay Later option.

How to Use the Pay Later Option

Follow these steps to file your ITR using the Pay Later option:

Step 1: Log In to the e-Filing Portal

Visit the official Income Tax Department e-filing portal.
Log in using your PAN or Aadhaar number and password.

Step 2: Navigate to ITR Filing

Click on the “e-File” option.
Select “Income Tax Return” and then “File Income Tax Return.”

Step 3: Enter Income and Deductions

Fill in your personal details, income information, and applicable deductions as usual.

Step 4: Review Tax Liability

The portal will automatically compute your tax liability based on the information provided.
Review and confirm the tax amount displayed.

Step 5: Select the Pay Later Option

In the payment section, you will see a summary of your tax dues.
Choose “Pay Later” instead of “Pay Now.”

Step 6: File and Verify Your ITR

Complete the filing process after selecting Pay Later.
Verify your ITR using a Digital Signature (DSC) or Electronic Verification Code (EVC).

Methods to Pay Taxes Later Using the Pay Later Option

After filing your ITR using the Pay Later option, you can settle your tax dues using the following methods:

1. Paying Through the e-Pay Tax Facility

This is the recommended method to avoid penalties and interest.

Log in to the Income Tax portal and go to the e-Pay Tax section.
Pay the outstanding tax electronically before any demand notice is issued.
Early payment through this method generally helps avoid penal interest.

2. Paying After Receiving a Tax Demand Notice

If your ITR is processed and a demand notice is issued, you can pay using one of the following options:

Self-Assessment Tax:
This option allows you to pay outstanding dues even before receiving an intimation notice. It is especially relevant if your ITR is marked as defective. You typically have 15 days from the date of the defective ITR notice to make the payment.
Tax on Regular Assessment:
If the tax authorities issue a demand notice after processing your ITR, the notice will include instructions for making the payment online. Following these instructions carefully ensures proper adjustment of the tax and helps avoid further penalties.

About the Author

Dakesh

Dakesh transforms complex legal regulations into clear, actionable insights, helping entrepreneurs remain compliant while building sustainable and scalable businesses.

January 10, 2026