Using UPI? UPI Transaction limit as per Income Tax & GST 2024

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What is UPI?

Unified Payments Interface (UPI) is an instant payment system developed by the National Payments Corporation of India (NPCI), an RBI regulated entity. UPI is built over the IMPS infrastructure and allows you to instantly transfer money between any two parties’ bank accounts.

UPI transfer limit per day

The UPI transaction limit per day is Rs.1 lakh as per NPCI. However, the limit is Rs.5 lakh for payments to educational institutions and healthcare. The maximum UPI daily transfer limit can change from bank to bank between Rs.25,000 to Rs.1 lakh. A few banks have also set UPI transfer limits per week or per month instead of a day.

UPI Limit as Per Income Tax:

Just like Cash Deposit & Withdrawal limit, Credit card Payments limit, Fixed Deposit limit as per Rule 114E of the Income tax Act, Directly there is no limit Specified in the Income Tax Act, But below are Indirectly linked with the UPI limits:

Income Limit to File ITR:

As per Section 139 (1) of Income Tax Act, it is mandatory for Company & Firm to file ITR and in case of any other person if they are having income above Exemption limit (Rs.250000) then they are required to File Income Tax Return.

Also there are some cases in Which ITR filing is mandatory even if Income is Zero:

Following are the some of the instances where an individual has to file his ITR irrespective of their income level:

If an individual had deposited more than Rs 1 crore or more in one or more current Account
If an individual had deposited more than Rs 50 Lakh or more in one or more Saving Account
If an individual has incurred an expenditure exceeding Rs 2 lakh for himself or any other person for foreign travel.
Has incurred an expenditure exceeding Rs 1 lakh toward electricity payment in a year.
For professionals, if the gross receipts exceed Rs 10 lakh they have to file ITR.
For Businesses, if Turnover exceeds Rs. 60 Lakh
If amount of TDS/TCS is deducted more then Rs.25000 (Rs.50000 in case of Senior citizens)
Is a beneficial owner or beneficiary of any asset outside India.
Is a signatory to a foreign bank account.

So In above cases you can see that if you are doing UPI transactions then limit specified for Saving Account and Current account become applicable to you and also if your Income is above Rs.250000 then also it is mandatory for you to file ITR, otherwise income tax department may serve you a notice

Now you may think i am doing UPI transaction which are linked with my Bank, How income Tax Department can Track my Bank or i am using multiple Bank account how IT department can Track, then you must aware that Income Tax Department Track your PAN and all Transactions of Bank are linked with your PAN card, So income Tax Department can easily track your Transactions which are called Specified Financial Transactions.

UPI transactions are subject to income tax in a similar way to that of income from mutual funds or fixed deposits. Section 56(2) of the Income Tax Act applies to all e-wallet transactions as they are all classified as ‘income from other sources’.

When submitting an ITR, you must provide detailed information about your salary and other sources of income, such as funds received from an e-wallet or UPI app. If you believe that transactions or money received through UPI are not tracked, you are mistaken. It is because the Income Tax Department tracks your every transaction.

Taxability of UPI and E-Wallet Transactions

UPI transactions are subject to tax laws similar to other financial transactions. Key points include:

Cash Receipts: Amounts up to Rs. 50,000 received via UPI are tax-exempt. Amounts exceeding this are treated as gifts and are taxable, unless it’s repayment of a loan.

With UPI transactions, people can send or receive cash whenever needed. If the receipt is for a sum up to Rs 50,000, it is exempt from tax. Anything over that is treated as a gift and is taxable. However, if you have just received money your friend owed you, it won’t be taxable.

Gift Vouchers: Employer-provided gift vouchers over Rs. 5,000 via UPI are taxable.

According to Income Tax rule 3(7) (iv), when employers offer a gift voucher for more than Rs 5,000 via UPI, UPI tax is applicable. However, if such amounts transferred through e-wallets are not reported, it might result in reassessment under Section 147 of the Income Tax Act.

Cashback and Rewards: Cashback from e-wallets, if exceeding Rs. 50,000 in a fiscal year, is considered a taxable gift under Section 56(2) of the Income Tax Act.

Users of e-wallets earn cashback rewards if they use their e-wallets to make online payments, which is why the use of e-wallets is rising. The term ‘gift’ under this Act is any sum you have received, and hence cashback from these e-wallets is termed as a ‘gift’ and is governed under the Act.

According to Section 56(2) of the Income Tax Act, cashback is taxable if it exceeds Rs 50,000 in a single fiscal year. Similarly, gift vouchers from friends and family valued more than Rs 50,000 in a single fiscal year are taxable. ,

UPI Limit as Per GST:

Same as Income Tax, There is no limit for UPI specified under GST Act. But there is limit to obtain GST Registration, which is specified in the GST Act as Below:

If any Person Supply Goods Only then aggregate turnover limit is Rs.40 Lakhs

if any person supply Services only then aggregate turnover limit is Rs.20 Lakhs

So if we link above with UPI then you must have to see the transactions and Aggregate them if total of a year comes above these limits then you are liable to get GST Registration.

Watch Below Video to know GST Registration Limit: