We are living in a modern world, where we are using various types of gadgets and apparatus for our facilitation. The development of internet is one of the most important invention in our life. The internet has brought the world on our finger tips. There are various types of gadgets and apparatus ,we are using in our daily life such as computer systems, laptops, iPods , mobile phones etc., they help doing our work faster and with more efficiency and accuracy.

Our banking system has also developed a lot by utilising modern gadgets and technologies. The banks have been updated themselves by using internet and other available modern techniques. A robust and strong banking system is essential for development of a country and through this we shall prohibit money laundering. The government of India has also done a lot to brought all cash transaction under banking system. The government has inserted various incentives and penalties to use banking system and prohibit the cash system to reduced generation of black money.

The introduction of a Unified Payment Interface (UPI) is a smartphone application that allows users to transfer money between bank accounts. It is a single-window mobile payment system developed by the National Payments Corporation of India (NPCI). The Unified Payment Interface is a real-time payment system.

Excess UPI use may Invite notices from Income TaxGST Department

Remember that excessive use of UPI and use of UPI for help of your friends, family members, others may land you in trouble. So keep in your mind below mentioned examples before using UPI and your bank accounts for payment on behalf of others.

Person generally use his/her UPI for making payment on beheld of others for some benefits of reward pints or cash back , but these incentives are not commensurate with the problem you will face in future ,when you receive notice from Income Tax & GST departments for payment of taxes.

LET’S US CONSIDER SOME EXAMPLES FOR UNDERSTANDING THE CONSEQUENCES OF USING EXCESS UPI;

1. Mr. A is a real estate broker and he is serving his clients through booking as well as registration services. The generally asked his clients to deposit /transfer stamp duty and registration charges in his account maintained by him, from where he is paying registration and stamp duty charges to the government. In Mr. A case suppose his turnover in his bank account during FY 2020-21 was Rs. 2.00 Crores ( approx). In this case he has crossed threshold limit of registration of GST and GST department may ask for GST Payment and registration requirements and also Income tax department asked for details of payment received in his bank account. Mr. A in this case has to maintain KYC of each depositor and each client depositing money in his account and this turnover will be shown in his books of accounts. He has to maintain proper books of accounts.

2. Mr. B is a individual and he is helping his friends and family members by paying through his UPI or bank accounts of various transactions and asked his family members/friends to deposit cash /transfer cash to his bank account. In this case suppose for getting incentive of 1 /2% you have transacted in your bank account up to Rs. 40.00 lakhs or more during the year FY 2020-21. In this case you have earned just Rs. 40000/Rs 80000 as cash incentives but you are liable to GST provisions ,since you have crossed threshold limit of Rs. 40.00 Lakhs , the GST department as well as income tax department will consider your turnover Rs. 40.00 lakhs or more and income tax asked for payment of presumptive tax or audit of your accounts in case you are not paying theses taxes. This will land you in trouble for sake of small incentives.

3. Mr. C is doing business of a travel agent and he is using his Credit cards for booking of Airlines tickets directly from website of Airlines. He has done a transaction to the tune of Rs. 74.50 lakhs during the FY 2020-21. In Mr. C case since he has done booking of hundred persons , but not able to asked for their KYCs and may received payment through bank as well as through cash. Now the GST and Income Tax Authorities will consider his turnover of Rs. 74.50 Lakhs as turnover during FY 2020-21 and asked for payment of tax. He is liable to register in GST also because his TO has crossed Rs. 40.00 Lakhs and Income Tax Authorities may asked for presumptive taxation or audit of books of accounts in case lower declaration of Income Tax. After this the department may ask you the source of receipt and payments and this will land you in deep trouble.

The tax authorities are not your relatives and hence they will not show any remorse on you and will levy tax and penalty.

4. Please note that in above cases you have to prove the sources of income and you have to keep the KYC of payers to produce before the revenue authorities to prove that you are helping your friends and family members and not transacting any business /profession.

5. Banks are generally required to report suspicious of some specified transaction to the department under provisions of Income Tax Act, 1961.

6. If you really want to do such types of transactions, then you have to open a Current Account and use the same for your business and helping others, but note that please keep KYC of your depositors and payers to prove that transactions are genuine.

7. You have to avoid using UPI payments on behalf of others and receiving cash. This will also land you in trouble. Because you are helping in cash transactions ,which are strictly prohibited. Generally some people asked for cash payment against UPI done on behalf of other person. Before doing so you have to ask that person for his/her KYC for your protection.

CONCLUSION; it is advisable to don’t be “Mother Theresa” and use your bank as well as your UPI payment system wisely. Always keep in mind that the revenue department is keen to extract more and more money from you, because they are paid for that and your kindness or sympathy may land you in trouble. Your greed of receiving cash discount/rebates/incentives from using excessive UPI may land you in trouble, which will cost you much more in future.

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DISCLAIMER; the above article is only for imparting knowledge to the readers. Please consult with your tax consultants before taking any action to use your UPIs for payments on behalf of others.

Author Bio

Qualification: CS
Company: SBI GENERAL INSURANCE COMPANY LIMITED
Location: MUMBAI, Maharashtra, India
Member Since: 25 Aug 2018 | Total Posts: 185
A Qualified Company Secretary, LLB , LIII , Bsc( Maths) BHU, Certification in Insurance Risk Management ( ICSI-III) have completed Limited Insolvency Examination and having more than 20 years of experience in the field of Secretarial Practice, Project Finance, Direct Taxes ,GST, Accounts & F View Full Profile

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5 Comments

  1. Dinesh says:

    Very useful information and this article creates awareness to the people who are unaware of taxes which will be charged after the financial year. To avoid unnecessary fines we have to be careful in using our financial activities. Nowhere this discourages UPI. Thank you.

  2. Somvir Singh says:

    Dear Author, your article is well defined and easy to understand. The message you did deliver is Avoid UPI transaction for larger amount and try to keep KYC of depositors. I got that. Thanks

  3. devilinmyheart says:

    This is totally wrong
    One of my relatives do daily transaction of 1 lakh and more but he has not received the income tax notice his expenditure is more than what you said

  4. Pronoy Ghose (Law Officer) says:

    Dear author, your title of the article is somehow misguiding and may discouraged people from using digital payment method.

    As per law auspicious transaction are reported to RBI by banks and after crossing certain limit transaction may be deemed suspicious. But that doesn’t mean to avoid using digital payment method. If the account holder is paying tax and has sufficient reason for justification of transactions then he may do unlimited transactions.

    Please change title of the article. It should have been “avoid unnaccounted UPI transactions”

    1. CS Deepak Pratap Singh says:

      Dear Sir,

      Thanks for your concern.
      This is to inform you that my intention is not to discourage use of UPI but it’s utilisation in proper ways. A person should utilised these e-payment systems for his own benefits and for the purpose of his business and not to help to do some money laundering purposes.

      If you have gone through the article , I have informed the readers the consequences of misutilisation of UPI and not to prevent them to use these payment systems.

      Please take above article in positive way.

      Regards

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