Acceptance of payment through prescribed electronic modes – Imposition of charge on the prescribed electronic modes

Income tax vide Circular No. 16/2020 dated 30-08-2020 issues orders to immediately refund the charges collected, if any, on or after 1st January, 2020 on transactions carried out using the electronic modes prescribed under section 269SU of the Income Tax Act and not to impose charges on any future transactions carried through the said prescribed modes.

Government in order to encourage digital transactions and move towards a less-cash economy, the Finance (No. 2) Act 2019 inserted a new provision namely section 269SU in the Income-tax Act, 1961, which provides that every person having a business turnover of more than Rs. 50 crores during the immediately preceding previous year shall mandatorily provide facilities for accepting payments through prescribed electronic modes(RUPAY debit card, UPI, UPI-QR-code and other digital payment modes).

Further, a new provision namely section 10A was also inserted in to payments and settelment systems act 2007, which provides 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 IT Act.

Later, through circular no. 32/2019 dated 30-12-2019 was issued by the board to clarify that based on section 10A of the PSS Act, any charge including the MDR (Merchant Discount Rate) shall not be applicable on or after 01st January, 2020 on payment made through prescribed electronic modes.

As the department received representations that some banks are imposing and collecting charges on transactions carried out through UPI(one of the prescribed mode of payments). Through this circular, banks are advised to immediately refund the charges collected, if any, on or after 1srt January, 2020, on transactions carried out using the electronic modes prescribed under section 269SU of the Income tax act, 1961 and not to impose charges on  any future transactions carried through the said prescribed modes.

https://www.incometaxindia.gov.in/communications/circular/circular-16-2020.pdf

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