CBDT advised Banks to refund the charges collected on E-transactions from 1st January, 2020

Central Board of Direct Taxes (CBDT) has issued Circular no. 16/2020 on 30th August, 2020 advising banks 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 Income-tax Act,1961. Banks are also advised not to impose any charges on any future transactions carried through these prescribed modes. The text of Circular no. 16/2020 is-

In furtherance to the declared policy objective of the Government to encourage digital transactions and move towards a less-cash economy. the Finance (No. 2) Act 2019 inserted a new provision namely section 269SU in the Income-tax Act, 1961 (“the IT Act”), which provides that every person having a business turnover of more than Rs. 50 crores during the immediately preceding previous year shall mandatorily provide facilities for accepting payments through prescribed electronic modes.

Read Also: CBIC and CBDT Merger, a false claim by News Reports : Govt Clarified

Further, a new provision namely section 10A was also inserted in the Payment and Settlement Systems Act 2007 (“the PSS Act”), which provides that no bank or system provider shall impose any charge on a payer making payment, or a beneficiary receiving payment, through electronic modes prescribed under section 269SU of their IT Act. Subsequently vide notification no. 105/2019 dated 30.12.2019

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

were notified as prescribed electronic modes under section 269 SU of the IT Act.

2. A circular no. 32/2019 dated 30.12.2019 was issued by the board to clarify that based on section 10A of the PSS Act, any charge including the MDR (Merchant Discount Rate) shall not be applicable on or after 01st January, 2020 on payment made through prescribed electronic modes. However, 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 269 SU of the IT Act. Such breach attracts penal provisions under section 271 DB of the IT Act as well as section 26 of the PSS Act.

Read Also: 15 Reasons you may get Income Tax – CBDT Notice

3. Banks are, therefore, advised to immediately refund the charges collected, if any, on or after 1″ 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.