SECTION 269SU: AN INTIATIVE TO BOOST DIGITAL TRANSACTION
The Government of India has adopted several fiscal and non-fiscal measures to move towards a less cash economy, to reduce the generation and circulation of black money and to promote the digital economy, The GOI with a vision to transform India into a digitally empowered society and knowledge economy introduces various flagship digital Programs. “Faceless, Paperless, Cashless” is one of professed role of Digital India. Cashless payments are taking off in India, growing faster than in other countries around the world. Digital transactions in India increased by 55% last year, compared with 48% in China and 23% in Indonesia, according to data from the Bank for International Settlements (BIS). As per the Report of RBI Digital transactions set to rise four times by 2021. As part of promoting cashless transactions and converting India into less-cash society, various modes of digital payments are available. The Government to encourage digital economy and move towards a less-cash economy, a new provision namely Section 269SU was inserted in the Income-tax Act, 1961…
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Scope and Applicability of Section 269SU
With a view to promote digital transaction, Finance Act No. 23 of 2019 inserted a new section namely 269SU, w.e.f. 1-11-2019 which provided for acceptance of payment through prescribed electronic modes. As per the said section, every person, carrying on business is required to provide facility for accepting payment through “prescribed electronic modes”, if his total sales, turnover or gross receipts in business exceeds Rs. fifty crores rupees during the immediately preceding previous year. However prescribed electronic modes were not clarified at that time.
To clarify the prescribed electronic Modes, CBDT had issued Notification No. 105/2019 dated 30/12/2019 prescribed following modes w.e.f from 1st day of January 2020. (Rule 119AA),.
Modes of payment for the purpose of section 269SU.-
Every person, carrying on business, if his total sales, turnover or gross receipts, as the case may be, in business exceeds fifty crores rupees during the immediately preceding previous year shall provide facility for accepting payment through following electronic modes, in addition to the facility for other electronic modes of payment, if any, being provided by such person, namely:—
(i) Debit Card powered by RuPay;
(ii) Unified Payments Interface (UPI) (BHIM-UPI); and
(iii)Unified Payments Interface Quick Response Code (UPI QR Code) (BHIM-UPI QR Code).”
The Rule 119AA is applicable from 1 January 2020. Hence, from 1 January 2020, any person to whom the provisions of section 269SU are applicable should make available to its customers the methods of payment prescribed in Rule 119AA. Above mentioned e-payment modes are additional facility along with existing facility such as NEFT, IMPS RTGS etc.
Amendment of Section 269SU to Payment and Settlement Systems Act, 2007
Further, a new provision namely Section 10A was also inserted in the Payment and Settlement Systems Act 2007, 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 the Income-tax Act 1961. These provisions shall come into force with effect from 1st November, 2019. The Central Government proposes to prescribe certain electronic modes of payment for the purposes of Section 269SU. Accordingly, applications are hereby invited from the Banks and Payment System Providers, operating an authorized payment system under the Payment and Settlement Systems Act 2007, who are willing that their payment system may be taken into consideration for being prescribed as an eligible electronic payment mode under Section 269SU of the Income-tax Act 1961.
Penalty for non-compliance of Section 269SU
The law also provides for a penal provision in case of a default. If a person who is required to provide facility for accepting payment through the prescribed electronic modes of payment referred to in section 269SU, fails to provide such facility, he shall be liable to pay, by way of penalty, a sum of five thousand rupees, for every day during which such failure continues,” said the Finance (No 2) Act 2019.
Vide Circular no.32/2019, Government of India had clarified “In this connection, it may be noted that the Finance Act has also inserted section 271DB in the Act, which provides for levy of penalty of five thousand rupees per day in case of failure by the specified person to comply with the provisions of section 269SU”.
In order to allow sufficient time to the specified person to install and operationalize the facility for accepting payment through the prescribed electronic modes, it is hereby clarified that the penalty under section 271DB of the Act shall not be levied if the specified person installs and operationalizes the facilities on or before 31st January, 2020. However, if the specified person fails to do so, he shall be liable to pay a penalty of five thousand rupees per day from 01st February, 2020 under section 271DB of the Act for such failure.
No penalty under Section 271DB, if the person installs and operationalizes the facilities on or before 31st January, 2020. So, the businesses, firms, shops get a final 1 month time to go digital and save themselves fdrom shelling out hefty fines!!
KEY POINT OF SECTION 269SU of Income Tax 1961
The decision is based on the government’s decision to promote digital payments and less-cash economy articulated in the budget presented by finance minister on July 5, 2019.In Budget Speech, the minister said there are low-cost digital modes of payment such as BHIM UPI, UPI-QR Code, Aadhaar Pay, certain Debit cards, NEFT and RTGS, which can be used to promote less cash economy and propose that the business establishments with annual turnover more than Rs Fifty crores shall offer such low cost digital modes of payment to their customers and no charges or Merchant Discount Rate shall be imposed on customers as well as merchants. The MDR is the percentage of the digital transaction that a merchant pays to banks and this cost is most often passed on to the customers. RBI and Banks will absorb these costs from the savings that will accrue to them on account of handling less cash as people move to these digital modes of payment. The above mentioned measures are introduced to achieve the target of a highly digitized and less cash economy. Hope this will boost Digital transaction vis-a vis Indian Economy.
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