prpri Section 269SU: Payment receipt through prescribed E-modes Section 269SU: Mandating Acceptance of Payment through prescribed Electronic modes

Section 269SU: Mandating Acceptance of Payment through prescribed Electronic modes


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 December 2019 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 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.ž

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. ž


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.

269SUIn case of any doubt or query, readers are requested to approach the author at

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August 2021