Section 269SU | Acceptance of Payment through Prescribed Electronic Modes

Section 269SU of the Income Tax Act, 1961.

To achieve the mission of the Government to move towards a less-cash economy and to promote digital economy, a new section 269SU was inserted in the Act w.e.f. the 1st day of November, 2019 through The Finance (No.2) Act, 2019.

Section 269SU provides that every person, carrying on business, shall, provide facility for accepting payment through the prescribed electronic modes, in addition to the facility for other electronic modes of payment, if any, being provided by such person, if his total sales, turnover or gross receipts in business exceeds Rs.50 Crores during the immediately preceding previous year.

To give effect to the aforesaid provision, CBDT vide Notification No. 105/2019 {G.S.R. 960(E)} dated the 30th December, 2019 inserted Rule 119AA w.e.f. the 1st day of January, 2020 in the Income Tax Rules, 1962 to notify the prescribed electronic modes being:

1. Debit Card powered by RuPay;
2. Unified Payments Interface (UPI) (BHIM-UPI); and
3. Unified Payments Interface Quick Response Code (UPI QR Code) (BHIM-UPI QR Code)

Circular No. 32/2019 was issued on 30th December, 2019 requiring the persons specified in Section 269SU to provide electronic payment facilities as prescribed in Rule 119AA w.e.f. 01st January, 2020.

However, representations were received by the government stating that, 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. In view of the above, Circular No. 12/2020 was issued on 20th May, 2020 to clarify that the provisions of section 269SU of the Act shall not apply to a specified person having only B2B transactions (i.e. no transaction with retail customer/consumer) if 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 any mode other than cash.

Section 271DB of the Income Tax Act, 1961.

To ensure compliance of the provisions of Section 269SU, The Finance (No. 2) Act, 2019 has inserted a new Section 271DB in Income-tax Act w.e.f. November 1, 2019 to provide that the failure to provide facility for electronic modes of payment prescribed under section 269SU shall attract penalty of a sum of Rs.5,000/-, for every day during which such failure continues. The section also provides for immunity from penalty in case a person proves that there are good and sufficient reasons for such default. Any such penalty shall be imposed by the Joint Commissioner.