Refund charges levied on UPI, RuPay transactions in 2020: CBDT to banks

The Central Board of Direct Taxes (CBDT) on Sunday asked banks to refund the charges collected on transactions carried out through electronic modes like RuPay cards or BHIM-UPI on or after January 1, 2020. Income Tax department has also advised banks to not levy any extra charge on any future transactions carried out through these modes.

The action was taken after it was observed that some banks were levying and collecting charges on transactions carried out through electronic mode. As per the new rule, which is applicable from 1 January 2020, no charge including MDR (Merchant Discount Rate) is applicable on payments made through electronic modes. A certain number of transactions are allowed free of charge beyond which every transaction bears a charge.

"Banks are advised to immediately refund the charges collected, if any, on or after January 1, 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," the CBDT said in a circular.

"Such practice on part of banks is a breach of section 10A of the PSS (Payment and Settlement Systems) Act as well as Section 269SU of the Income Tax Act. Such breach attracts penal provisions...," the CBDT said.

In a bid to encourage digital transactions and move towards a less-cash economy, the government inserted a new provision, Section 269SU, in the Finance Act, 2019. The Act requires a person carrying on business and having sales/turnover/gross receipts from business of more than Rs 50 crore in the immediately preceding previous year to mandatorily provide facilities for accepting payments through prescribed electronic modes.

Subsequently, in December 2019, debit card powered by RuPay; Unified Payments Interface (UPI) (BHIM-UPI); and Unified Payments Interface Quick Response Code (UPI QR Code) were notified as prescribed electronic modes.

With PTI inputs

Also Read: June records 78% jump in UPI transactions

Also Read: How online frauds are growing in the digital payment space