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The Indian Government launched the Digital India campaign to make available government services to citizens electronically by online infrastructure improvement and also by enhancing internet connectivity. It also aims to empower the country digitally in the domain of technology. Prime Minister Narendra Modi launched this  campaign on 1st July 2015.

For this very reason The government of India has introduced many new changes in the existing system of Indian Economy and the introduction of section 269su in The Finance (No. 2) Act, 2019 which required every person with a business turnover, sales or gross receipts exceeding Rs. 50 crores to mandatorily provide facilities for accepting payments through prescribed electronic modes is one of the most effective measure to promoted digitalisation in a developing country like India.

Now the first question to be addressed is what are the prescribed electronic methods of payment The CBDT vide its Notification [No.105/2019/F. No. 370142/35/2019-TPL] dated 30th December2019 has prescribed such electronic modes, which needs to be provided from 1 January 2020.

The first option is payment through Debit Card powered by RuPay Followed by Unified Payments Interface (UPI) (BHIM-UPI); and Unified Payments Interface Quick Response Code (UPI QR Code) (BHIM-UPI QR Code).

The next question would be the meaning of turnover in this provision In the statement issued by ICAI on the companies (Auditors’ Report) Order 2016 the word ‘turnover’ has been defined as under-

“The term ‘turnover’ for the purposes of this clause may be interpreted to mean the aggregate amount for which sales are effected or services rendered by an enterprises”

Unless the CBDT clarifies its stand on this matter, it would be appropriate to ignore the amountof GST while calculating the gross turnover or gross receipts.


The applicability of the provisions of section 269SU to those business entities who do not receive payments from retail customers was always in question. This is because it is not practical to receive payments from customers by B2B enterprises since they are distant and large customers who prefer to make payment by banking channels like NEFT/RTGS rather than by debit cards or BHIM/UPI which are primarily meant for payment modes by individual and retail customers. Further, there are restrictions on amount and number of transactions on cards and UPI and other prescribed modes of payments.

Since section 269SU did not provide any exemption for any entities rather was made applicable to all, it was unnecessarily increasing the cost of compliances for B2B entities. Those entities had to compulsorily comply with the provisions of section 269SU without any purposeful use since violation of section 269SU attracts a penalty of Rs 5,000 for each day of default. Many businesses were forced to install such payment facilities, even though such facilities were never supposed to be used for such businesses, considering the nature of business or customer base.

It has also stated that this clarification is based on the representations that have been received by it, stating that the requirement of the mandatory facility for payments through the prescribed electronic modes is generally applicable in B2C (Business to Consumer) businesses, which directly deal with retail customers. Moreover, since the prescribed electronic modes have a maximum payment limit per transaction or per day they are not so relevant to B2B (Business to Business) businesses, which generally receive large payments through other electronic modes of payment such as NEFT or RTGS.

Mandating such businesses to provide the facility for accepting payments through prescribed electronic modes would cause administrative inconvenience and impose additional costs, the CBDT clarification added.


From the above clarification, it must be borne in mind that the exemption from applicability of provisions of section 269SU is not a blanket one but conditional.

Exception from the applicability of installation of prescribed modes of payments from section 269SU is available in the following cases-

1. The exception is applicable only to a specified person having only B2B transactions.

2. At least 95% of the aggregate of all amounts received during the previous year, including the amount received for sales, turnover or gross receipts, are by other than cash.

If both the conditions are satisfied then only the B2B businesses are exempt from the applicability of section 269SU.

B2B are those enterprises which have no transaction with retail customers/consumers. The receipt of the 95 per cent threshold is not limited to receipt from sales or turnover only. It covers all the receipts of the entity like receipt of loans, credits, capital contribution in the firm, etc. However, the restriction is limited to receipts in cash only and does not cover payments in cash. Further, in case, a B2B entity also carries on retail business, then it has to implement and install the prescribed mode of payments. However, this condition does not mean that there is a ban on cash transactions completely.

Recently, CBDT has notified other electronic modes of payments under the Income Tax Act, 1961 vide Notification No. 08/2020 dated 29.01.2020 and inserted new Rule 6ABBA to prescribe for other electronic modes of payments as prescribed for certain sections of the Act as per amendments introduced by the Finance Act, 2019.

Circular No. 12/2020 clarified that the provisions of section 269SU of the Act shall not be applicable to a specified person having only B2B transactions (i.e. no transaction with retail customer/consumer) if at least 95% of aggregate of all amounts received during the previous year, including amount received for sales, turnover or gross receipts, are by other than cash.

  • an assessee which is 100 percent export-oriented (i.e. no domestic sales, and therefore, all payments will always be received through normal banking channels); and
  • a foreign company carrying on the business through a Permanent Establishment (PE) in India.


The Penal provision for non-compliance of Section 269SU is covered by Section 271DB.

As per Section 271DB, if the above provision not fulfilled w.e.f. 01.02.2020 penalty of 5,000/- per day would be levied after 01st Feb 2020.

However, if the business fulfilled the criteria of install or operationalizes Digital payment system till 31st January 2020 so the penalty would not be levied.

business fulfilled the criteria

(Republished with amendments)

Read Also:-

1 Introduction Say no to Cash Transaction- Benefits of Cashless Transactions
2 Restrictions on Expenditure (Capital & Revenue) Section 40A(3)/(3A) Restrictions on Cash Expenditure (Capital & Revenue)
3 Incentives to encourage cashless business transaction Tax Audit- Incentives to encourage cashless business transaction
4 Restrictions on Loans, Deposits& Advances Restrictions on Cash Loans, Deposits & Advances under Income Tax
5 Restrictions on cash transactions in Real Estate Restrictions on Cash Transactions in Real Estate under Income Tax
6 Disallowance of Income Tax Deductions Section 80D Deduction in respect of health insurance premia
7 Restrictions on cash transactions Rs. 2 Lacs or more Restrictions on Cash Transactions of Rs. 2 Lacs or More under Income Tax
8 Provisions of Section 269SU Section 269SU: Mandating Acceptance of Payment through prescribed Electronic modes
9 Tax Deducted At Source Provisions on Cash Transactions Section 194N TDS Provisions on Cash Transactions
10 Cash Transactions in Agriculture Sector Cash Transactions in Agriculture Sector- Income Tax Provisions
11 Cash Restrictions on Charitable Trusts Cash Transaction Restrictions on Charitable Trusts under Income Tax
12 Reporting High value Cash Transactions High Value Cash Transactions & Mandatory Return Filing (ITR)
13 Miscellaneous

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June 2024