CBDT says the banks not to charge fees on digital transactions

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The Central Board of Direct Tax (CBDT) has instructed the banks to not charge any fees on digital transactions and also to refund all the fees collected from January 2020.

There were representations that some banks impose and collect charges on UPI transactions. According to a circular issued by the board signed by Ankur Goyal, under secretary to Government of India, banks are advised to reimburse immediately the charges collected, if any, on or after 1 January 2020, on transactions carried out using the electronic modes prescribed by section 269SU of the Income Tax (IT) Act. The circular also requested banks not to impose charges on any future transactions carried on such modes as the debit card powered by RuPay, BHIM-UPI, and UPI.

According to the circular, it was received representations that some banks enforce and collect charges on UPI transactions. There is a certain number of free transactions allowed beyond which each transaction bears a charge.

Ankur Goyal says such practice is a violation of section 10A of the Payment and Settlement Systems (PSS) Act as well as section 269SU of the IT Act on a part of banks. Such infringements attract penal provisions under section 271DB of the IT Act and section 26 of the PSS Act 2007.

In the immediately preceding year, the IT Act provided businesses with a turnover of over Rs 50 crore are required to have facilities for receiving payments through electronic means.

The government later also introduced in the PSS Act a new clause called section 10A according to which banks could not charge a payer making a payment or a receiver receiving payment by electronic means specified by Section 269SU of the IT Act.

On 30 December 2019, the board clarified that any charge including merchant discount rate (MDR) should not be applicable on or after 1 January 2020 on payment via specified digital modes, based on section 10A of the PSS Act. For transactions above Rs 1,000 except GST, multiple banks charge Rs 2.5 for UPI transactions up to Rs 1,000, and Rs 5.

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