Central Board of Direct Taxes (CBDT) issued a circular directing all banks to stop applying any charge on payments made via the prescribed electronic mode of transactions.
It also mentioned that banks will have to refund the charges collected on payments made via UPI, Rupay debit card, QR Code or as MDR on transactions made on or after January 1, 2020.
MDR is the rate or processing fee (ranged between 1%-3%) charged to a merchant to assist the transactions made via credit or debit cards.
MDR was reduced to zero for UPI, Rupay and QR Code by Finance Minister Nirmala Sitharaman in December 2019 and the exemption was applicable from January 1, 2020. However, some banks have been charging a fee on UPI transactions as mentioned in the circular which forced India’s apex body on direct taxation to initiate action.
“Some banks are imposing and collecting charges on transactions carried out through UPI. A certain number of transactions are allowed free of charge beyond which every transaction bears a charge. Such practice on part of banks is a breach of section 10A of the PSS Act as under section 269SU of the IT Act. Such breach attracts penal provisions…,” the circular said.