The Central Board of Direct Taxes (CBDT) issued Circular No.16/2020 on August 30, 2020, regarding Section 269SU of the Income Tax Act, 1961, about the imposition of charges on the prescribed electronic modes of payment.

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Based on the information provided in the circular, “Representations have been 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 IT Act. Such breach attracts penal provisions under section 271DB of the IT Act. Such breach attracts penal provisions under section 271 DS of the IT Act as well as section 26 of the PSS Act.”

Therefore the circular mentioned, “Banks are, therefore, advised 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 IT Act and not to impose charges on any future transactions carried through the said prescribed modes,” such as debit card powered by RuPay, BHIM-UPI, and UPI QR Code, based on section 10A of the Payment and Settlement Systems (PSS) Act 2007, any charge including the MDR (Merchant Discount Rate) shall also not be applicable.

With Warm Regards,

CL Bureau.

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