CBDT DIRECTS BANKS TO REFUND CHARGES COLLECTED AFTER JANUARY 1 FOR UPI TRANSACTIONS.

CBDT DIRECTS BANKS TO REFUND CHARGES COLLECTED AFTER JANUARY 1 FOR UPI TRANSACTIONS.

The step has been taken to encourage digital payments in the country and a move to promote the cash-less economy.

 

The Central Board of Direct Taxes (CBDT) directed the banks to return any fees levied for making Unified Payment Interface (UPI) transactions after 01st January 2020 to customers and merchants. The board said that if banks charge such fees then it’s a violation of the law.

 

A circular has been issued by the department through which the lenders have been instructed to stop charging such fees or get ready to face the penal actions. As per the department, the banks cannot impose any extra fees on such transactions that are made through electronic mode.
 

Important instruction of the Circular

1.  As per the Finance (No. 2) Act 2019, a new provision has been inserted namely section 269SU in the Income-tax Act, 1961 which states that provision of providing the facilities for accepting payments through prescribed electronic modes has become mandatory for that person whose business turnover exceeds Rs. 50 crore during the immediately preceding previous year. 
 

2.  In the Payment and Settlement Systems Act 2007, a new section has been inserted named Section 10A. As per this section, no bank or system provider shall impose any charge on a payer making payment, or a beneficiary receiving payment, through electronic modes as prescribed under section 269SU of their IT Act.
 

3.  The Board on 30th December 2019 issued a notification no. 105/2019 and through it the board notified that under section 269 SU of the IT Act, the following electronic modes has been prescribed:

  1. Debit Card powered by RuPay; 
  2. Unified Payments Interface (UPI) (SHIM-UPI); and 
  3. Unified Payments Interface Quick Response Code (UPI QR Code) (SHIM-UPI QR Code) 
     

4.  Earlier, the board on 30th December 2019, has issued a circular no. 32/2019 to clarify that according to section 10A of the Payment and Settlement Systems Act 2007, any charge that includes the Merchant Discount Rate (MDR) shall not be applicable on or after 01st January 2020 on any payment made via prescribed electronic mode.
 

5.  The Central Board of Direct Taxes (CBDT) has received various representations that few of the banks are imposing and collecting charges on UPI transactions. There are certain numbers of transactions that are free of charge and after that on every transaction charges were imposed.

As per section 10A of the PSS Act as well as section 269SU of the IT Act, such practice on part of banks is a breach of law and therefore they will be penalized for such actions. Under section 271 DS of the Income Tax Act as well as section 26 of the PSS Act, the banks will be penalized for breaching the law.
 

6.  The Board had directed the Banks to immediately refund the charges collected, if any, on or after 1" January 2020 on transactions carried out using the electronic modes as prescribed under section 269SU of the IT Act. They have also been advised not to impose charges on any future transactions carried via said prescribed modes
 

Points to remember
  • Bank cannot impose any extra charge on the UPI transaction.
  • Banks are directed to refund the charge amount to the customers and the merchants.
  • The charges that are collected after the 01st of January 2020 to be refunded by the banks.
  • The Banks that have imposed any extra charges on the UPI transactions will be penalized under section 271 DS of the IT Act as well as section 26 of the PSS Act. 
     

Link of the circular:

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

Conclusion

This great initiative taken by the department will help in improving and strengthening the use of digital transactions in the country.
 

Edited by Minu Mishra

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