Valid from 1 February 2020, companies with an annual turnover of more than Rs 50 crore will be fined Rs 5,000 a day if they don’t accept digital payments. This move is to facilitate a cashless economy, says a circular issued by the Central Board of Direct Taxes (CBDT) on 30 December 2019.
This move is a serious step towards encouraging digital transactions and is a way towards achieving ‘less-cash’ economy. The Income Tax Act, 1961, is inserted with a new Section 269SU. This Section has made it compulsory for individuals running a business with a turnover of over Rs 50 crore to accept digital payments.
The Section was introduced to the Income Tax Act, 1961, as a part of the Finance Act, 2019. It is effective from 1 January 2020, and such businesses should be equipped with facilities to accept all digital payments that are made through the prescribed electronic modes.
Section 10A of the Payment and Settlement System Act, 2007, which was introduced through the Finance Act, 2019, system providers and bankers are not supposed to levy any charges on both the individual or entity making the payment and beneficiary receiving the payment in any king of the electronic modes prescribed.
No charges, inclusive of the Merchant Discount Rate (MDR), can be levied on either of the parties involved in the prescribed modes of digital transactions effective from 1 January 2020. The prescribed modes are; RuPay debit cards, Unified Payments Interface (UPI and BHIM-UPI), and Unified Payments Interface Quick Response (QR) Code.
The circular issued by the CBDT says that all eligible businesses should compulsorily install the facilities to accept digital payments and get them in operation on or before 31 January 2020. On failing to do so, they are liable to pay a fine of Rs 5,000 a day from 1 February 2020 as per Section 271DB of the Finance Bill, 2019.
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