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The Imposition of Charge on the Prescribed Electronic Modes Under Section 269SU of the Income-Tax Act, 1961
A new provision Section 269SU was inserted in the Income-tax Act, 1961 in furtherance of government’s policy to encourage digital transactions and move towards a less-cash economy.
The said Section 269SU prescribes the electronic modes for payments acceptance that an individual who is engaged in business has to provide in addition to the other electronic facility or digital mode of payment already available for the customers. It is operative for the traders or businessmen whose total sales, turnover or gross receipts from the business is more than INR 50 crore in the immediately preceding year.
Another provision which was inserted is Section 10A in the Payment and Settlement Systems (PSS) Act, 2007, which provides that no Bank or system provider shall impose any charge on a payer making payment, or a beneficiary receiving payment, through electronic modes prescribed under section 269SU of their Income-Tax Act, 1961.
Subsequently, vide notification no. 105/2019 dated December 30, 2019 the following were notified as prescribed electronic modes under Section 269SU of the Act.
- Debit Card powered by RuPay;
- Unified Payments Interface (UPI) (SHIM-UPI); and
- Unified Payments Interface Quick Response Code (UPI QR Code) (SHIM-UPI QR Code)
Another circular was issued by the board clarifying any charge including the MDR (Merchant Discount Rate) shall not be applicable on or after January 01, 2020 on payment made through prescribed electronic modes, based on section 10A of Payment and Settlement Systems Act, 2007.
However, it was received that some banks are imposing and collecting charges on transactions carried out through UPI. A certain number of transactions are allowed free of charge beyond which every transaction bears a charge. Such practice on part of banks is a breach of section 10A of the PSS Act as well as section 269SU of the Income-Tax Act.
Such breach attracts penal provisions under section 271DB of the Income-Tax Act, which is the person shall be liable to pay, by way of penalty, a sum of five thousand rupees, for every day during which such failure continues, as well as under section 26 of the PSS Act,2007.
The said circular thus advised banks to refund the charges if collected immediately on or after January 01, 2020 on transactions carried out using the electronic modes prescribed under section 269SU of the Income-tax act, 1961 and also to not impose charges in such further transactions by prescribed modes.
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