Overview
The government has directed several methods of payment for any business establishment and each type of entity whose gross and total sales, gross receipts, or turnover from business or transaction exceeds Rs 50 crores during the directly preceding previous year. The Finance (No. 2) Act, 2019 added a new provision, Section 269SU, and consequently issued Rule 119AA prescribing the methods of acceptance of payment.
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What is Section 269SU?
Section 269SU expects each person who is leading a business to implement the facility for receiving payments through designated automatic and electronic modes. These prescribed methods will be in addition to the ability for any additional electronic mode of return already given to consumers by such a person.
Section 269SU refers to a person when the complete sales, turnover, or gross discharges from industry exceeds and tops Rs 50 crores during the direct previous year. The section is appropriate from 1 November 2019. In such a situation, the section is suitable if the sales, gross receipts, or turnover exceed Rs 50 crores for the business year ended 31 March 2019.
Rule 119AA Outlines Modes for Approval of Payment
The CBDT or Central Board of Direct Taxes has announced the prescribed forms of payment for section 269SU:
- Debit Card payments powered by RuPay
- Further, Unified Payments Interface (UPI) or (BHIM-UPI)
- (UPI QR Code) Unified Payments Interface Quick Response Code and (BHIM-UPI QR Code)
The Rule 119AA is already suitable from 1 January 2020. Therefore, from 1 January 2020, any person to whom the requirements of Section 269SU are appropriate should make possible to its customers the methods of payment directed and prescribed in Rule 119AA.
Scope and Purpose of Section 269SU
The initiation of Section 269SU is a part of the government’s action for the development of digital returns or payments and a cashless economy. The government is developing low-cost digital forms of payment such as UPI-QR Code, some debit cards, BHIM UPI, Aadhaar Pay, NEFT(National Electronic Funds Transfer), RTGS (Real Time Gross Settlement) etc., to develop and encourage a cashless economy. Therefore, the government has proposed Section 269SU mandating business and company establishments or institutions with yearly turnover more than Rs 50 crore to allow some low-cost digital methods of payment to their customers.
Moreover, the bank or the cash and payment method provider is mandated to not levy any statements or dealer, merchant discount rate on the clients as well as merchants for applying the methods of payments guided under Section 269SU. The Reserve Bank of India (RBI) and banks have to understand the expenses acquired towards these modes of returns and payments.
Penalty for Non-compliance
In a situation where a person who is reported by the terms and provisions of Section 269SU declines to implement the ability of payment below the guided modes, such form would be responsible for a fine and penalty of Rs 5,000 for each day through the failure or non-availability of the facility.
However, no penalty would be taken if the person connects and operationalizes the preferred payment facility by 31 January 2020. The power to command the penalty vests with the Joint Commissioner of Income Tax. Such an individual or person would be generally issued a show-cause notice to explain why a fine or penalty should not be required for non-compliance. Additionally, the Joint Commissioner may not require a penalty if the person defaulting with the requirements of Section 269SU explains that there were great and enough reasons for such negligence.
Amendments to the Payment and Settlement Systems Act
A new Section 10A was included in the Payment and Settlement Systems Act, 2007 with impact from 1 November 2019. The Section specifies that no bank or cash system provider may require any charge upon anyone, both indirectly and directly, for managing the electronic modes of return directed under Section 269SU of the Income Tax Act of 1961. The Section was also introduced by the Finance (No. 2) Act, 2019.
Therefore, a bank or a cash system provider would not require any charge on the person performing the payment or the person getting the payment through the method of any of the guided modes under Section 269SU.
FAQs on Electronic Modes for Acceptance of payments for Business under Section 269SU
Section 269SU is not placing a limitation on practising any of the current modes of receiving payments. Although, it is only making it compulsory for that businessman whose turnover is more than Rs 50 crores to hold those three guided modes necessary in their system as a payment choice for their customers.
Hence, don’t get distracted with any suggestions which were there in the market concerning placing restrictions on other cash modes. You can accept payment by the method of the cheque.
E-money or electronic money is broadly described as an electronic store of financial value on a special device that may be broadly used for making payments to entities other than the e-money issuer. The device works like a prepaid collector or bearer device which does not significantly include bank accounts in transactions.
E-money results can be software-based or hardware-based, depending on the technology related to store the financial or monetary value.
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