Maximize Your UPI Transactions: Understanding 2024 Limits Under Income Tax & GST

In the highly competitive world of Internet banking and to adopt a newer and improved means of transactions, UPI has been acclaimed as a revolution to transform the world of banking. This is especially so as we move into the year 2024 and welfare seeks to understand the policies and Regulations under the Facade of UPI regarding income tax as well as Goods and Services Tax (GST). This guide “2024 Income Tax & GST Transaction Limits,” will help you better understand the current limits, compliance, and insights applicable to your financial operations, and how to manage them effectively.

Especially if you make UPI transactions daily for your groceries or if you manage a business that incorporates this payment method into daily operations, it’s crucial to be acquainted with the current legal frameworks concerning these financial transactions.

What is UPI ?

UPI is an inter- mobility payment system , which enables money transfers between banks at the same time entirely through a mobile application. First, you install UPI-supported applications which include Google Pay, PhonePe, or BHIM, among others, then connect the account to the application. You then generate a personal unique identifier for yourself that works like the Uni-mail address but is employed especially in the handling of finances.

UPI means Unified Payments Interface from the name only, it is clear that using your UPI ID you can pay or receive money without necessarily knowing the holder’s account number. To transfer funds, a user is required to enter the recipient’s UPI ID or scan the QR code, enter the desired amount, and there is a four-digit code  to authenticate the transaction at the time of sign-up for the application. This makes the process easy without much fuss which goes into it.

UPI Transfer Limit Per Day

The UPI transaction limit available per day for a particular UPI ID per user is up to Rs. 1 lakh as per NPCI. However there are some restrictions such as the maximum limit for Educational Institutions and Healthcare shall not exceed Rs. 5 lakh. The upper cap for carrying out UPI transactions in a single day also varies from bank to bank starting from Rs 25000 to up to Rs 100000. Some of the banks have even adopted the practice of putting a cap on the amount that one could transfer through the use of UPI transfer per day or week or month.

UPI Limit as Per Income Tax:

Just like the 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: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:

The general rule of filing Income Tax Return can be summed up as any company & firm must file ITR and for any other individual must file ITR if their income exceeds Basic Exemption Limit which is Rs. 250000. 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:

• In case the current Account balance of the individual was more than Rs 1 crore or more in one or more of the current Account

• Instead of this if an individual had deposited more than Rs 50 Lakh or more in one or more Saving Account

• If a party has incurred an expense on account of himself as well as any other person for foreign travel more than Rs 2 lakh.

• Has spent more than Rs 1 lakh in a year to pay for electricity bills only.

• For others, in case of professionals also, it is mandatory in case the gross receipts cross over Rs 10 lakh ITR must be filed.

• For Businesses, in case where total Turnover of the Business exceeds sixtieth lakh of rupees

In the case of an individual, if the total amount of TDS or TCS has been deducted more than Rs. 25000 in a particular financial year and in the case of senior citizens, it is Rs. 50000. Does the holder reside in India and is a beneficial owner or a beneficiary of a financial asset that is located in another country. Investors who are a signatory to a foreign bank account.

Also Read: Income Tax Return (ITR) Filing Tips for Individual and Business for the New Financial Year

Taxability of UPI and E-Wallet Transactions

Manufacturers undergo tax rules in respect to UPI transactions like any other financial transaction. 

Key points include:

• Cash Receipts: 

On this method of payment, up to Rs. 50,000, the amount is tax free. Everything over this is considered as a gift and as such is recognized as a source of revenue, other than where it relies to repay on a loan.

Companies have an explicit right for workers’ remuneration while individuals have a fair chance to make or receive UPI transactions whenever they want. In case the receipt is for an amount up to Rs 50,000, there is no tax involved. Any amount in excess of the said taxable amount is considered as a rebate and therefore liable for taxation. However, if for instance, your friend pays you the money he owes you, the amount of money is not taxed.

• Gift Vouchers: 

Any vouchers that are given by the employer via UPI which can be utilized as gifts and have a value more than Rs. 5,000 are categorized as taxable gifts.

Indian Income Tax rule 3(7) With regard to the UPI tax, under Income Tax rule 3(7) (iv), UPI is required if the employer gives a gift voucher to the employee for an amount of more than Rupees five thousand. Thus, if such amounts transferred through e-wallets are not reported, this may lead to the SECTION 147 of the income tax act.

• Cashback and Rewards: 

Any amount credited to e-wallets, over Rs. 5,000 from a single entity and exceeding Rs. 50, 000 in a fiscal year, is considered a voucher under Section 56(2) of the Income Tax Act.

E-wallets also make consumers earn cash back on the amount spent by using their e-wallets while making payments; that is why people are using e-wallets. Under this Act the term ‘gift’, therefore, includes any sum you have received: hence ‘cash back’ from these e-wallets is the ‘gift’ within the terms aforesaid. In fact, as per the Section 56(2) of Indian Income Tax Act, the money that a company gets by way of ‘cashback’ is chargeable to tax if this amount exceeds Rs 50000 in one financial year. In addition, amounts received in the form of gift vouchers from friends & relatives, if such vouchers costing more than Rs. 50,000/ in a financial year is attractable to tax. ,

UPI Limit as Per GST

Similar to Income Tax, for UPI also there is no limit set by the GST Act. 

But there is limit to obtain GST Registration, which is specified in the GST Act as Below: 

• If any person supplies goods only then the condition of Turnover limit of Rs. 40 Lakhs is acceptable.

• If any person supplies Services only then aggregate turnover limit is Upto rs 2,00,000.

Therefore if you are dealing with above limits with any of them such as UPI then you have to look at the transactions and sum up the transactions if the total of a year crosses the threshold limit then you will be liable for getting the GST Registration.

Benefits of UPI Transactions

1. Convenience: 

For more than 5 decades, UPI has been a convenient solution for direct payment transfer through which the users can transfer funds 24/7 as well as 365 days in a year.

2. Speed: 

By this, various transactions conducted through the UPI are processed in real-time, hence providing for quick transfer of funds between parties.

3. Cost-effective: 

Usually, UPI transactions do not incur any cost or come at a minimal charge, which makes it a cheap payment system.

4. Security: 

Despite all these UPI transactions requiring user identification, making it difficult for fraudsters to transact on other peoples’ accounts.

Maximizing UPI Transactions Under Income Tax Regulations

1. Understanding the Limits

• Individual Transactions

As per Income Tax regulations, individual UPI transactions are subject to certain limits. These limits vary based on factors such as the user’s bank and transaction history.

• Annual Limits

There are annual limits imposed on UPI transactions for individuals. It is imperative to stay informed about these limits to avoid exceeding the permissible thresholds.

Strategies to Maximize UPI Transactions

• Plan Transactions: 

The third rule of thumb is that it is best to space the transactions within the prescribed guidelines in order to make UPI payments as beneficial as possible.

• Multiple UPI IDs: 

In case, the average of daily transactions touched in your ratio plan reaches the transaction limits of the UPI ID, then you should use multiple UPI ID across multiple bank accounts.

• Monitor Transaction History: 

You should practice periodic checks of the transaction log  to learn about the often used resources and services.

• Utilize Split Payments: 

For such forums, I would recommend that to ensure you do not commit an offense of violating the individual transaction limits of the ATM card, you split the amount into different smaller amounts to make transactions several times.

Optimizing UPI Transactions Under GST Regulations

1. GST Implications

However, this is not quite the case because under the Goods and Services Tax (GST) regime there are some rules and regulations regarding UPI transactions.

2. Input Tax Credit (ITC)

Through UPI, the customer gets Input Tax Credit (ITC) provided the documentation and compliance norms have been met.

3. Compliance Obligations

Retailers and sellers must be aware of GST norms before initiating UPI transactions so that legal actions can be dealt with appropriately.

Best Practices for Managing UPI Transactions

1. Maintain Detailed Records

Maintain the UPI transaction record book with proper columns to note date, transaction amount, payer/payee identity, and reason for the transaction. It will help in right reporting of income and correct filing of GST which implies that more revenues will be collected.

2. Use Reliable Accounting Software

Use of dependable accounting applications that can conveniently interface with the UPI channels. This eliminates the manual recording of business transactions, and makes it easier to prepare business financial statements and the filing of tax returns.

3. Consult with Tax Professionals

Conducting meetings with tax professionals will assist in keeping up-to-date with new changes to help with efficient tax strategies. They can give consultancy according to the customer Cap-IT and Cash-flow planning in a particular business.

Here are the guidelines that one has to follow and the threshold values set for the use of the UPI for various transactions are provided below:- By following these above steps, it is possible to maintain the efficient processing of the current income tax and the GST while carrying out the needful UPI transactions. This approach of yours will enable you to go round ways of avoiding penalties and just get the most of your tax laws.

Conclusion 

It is important to be fully aware of these 2024 limits for UPI transactions as they are governed by the Income Tax and Goods and Service Tax laws to remain aptly compliant in the financial climate. Reporting thresholds, TDS applicability, GST registration, and precise return filing should not create confusion for anyone, be it an individual or a business, and with the help of online tutorials and law articles, everyone can easily stay informed. Additional measures that can be taken such as  proper record keeping, proper use of accounting software, and seeking the advice of experts or tax consultants enhances the level of compliance and financial management. This preventive measure minimizes the risks of punishments and guarantees the ability to get the utmost value from UPI provided by the digital financial sector.

Also Read: How to Calculate GST in an Excel Sheet: Step-by-Step Guide

FAQ

• In 2024 regarding the income tax in section 44AD of Income Tax Act, what is the reporting threshold limit for UPI transactions?

As for the Income Tax regime, the reporting limit of UPI transactions is ₹20,000 per annum for a taxpayer or individual. This is the monetary cap for any transactions you enter into, and if you go beyond this, it will be necessary for you to report these to your income tax returns.

• Currently, regarding UPI transactions, is Tax Deducted at Source (TDS) liable to be paid?

Yes, TDS applies to some UPI transactions For those whose turnover has crossed the threshold limit during the previous year. For example, if a business pays a freelancer or contractor through its UPI and the amount was more than ₹30,000 in a single transaction and ₹1,00,000 in total in the financial year, then the TDS should be deducted as per Section 194 of the income tax Act of India.

• What is the turnover limit for GST enrollment through unified payment interface UPI?

New registrations under GST for the financial year 2024 requires businesses to pay the specified turnover rate of ₹ 40 lakhs for goods selling turnover and ₹ 20 lakhs for service providing turnover.

• Is it mandatory for a registered dealer or seller to include the UPI transactions in his GST return?

Yes, in the context of GST compliance profiling, if the UPI transaction involves supply of goods or services, then the documents evidencing such supply would be included in the GST returns, notably in Form GSTR-1 (Outward Supplies) and GSTR-3B (Monthly Summary).

• Let’s try to clarify if the businesses actually can avail ITC for the GST that has been paid on UPI transactions?

Yes, so when it comes to UPI transactions, businesses can claim ITC on GST paid for such expenses if the same is a permissible expense under the GST act.

• What are the advantages of filing UPI transactions in the Income Tax returns?

These are announcing UPI transactions which helps in the aspect of transparency, minimizes the possibilities of tax auditing, and also helps in claiming more deductions and exemptions, which in turn, can equally result in minimized overall tax payable.

• Does it influence UPI transactions by supporting e-invoicing?

E-invoicing is applicable starting with exceeding ₹5 crores in turnover. The UPI transactions conducted by the businesses and supply chain participants must tie up with the e-invoices for compliance as well as a smoother GST process.

• How does annual filing of returns in relation to UPI transactions help in income tax filing?

Making UPI transactions in India also benefits from improved compliances so as to declare transactions to minimize risks of tax audits, proper availing of tax deductions and exemptions, and possibly less overall tax liability.

• How does one optimally avoid the pitfalls and manage UPI transactions?

It is highly recommended that all UPI transactions are recorded appropriately and accurately, good accounting software should be used, and legal advice should be sought, and also the updates on the regulations should be followed.

• Is it mandatory to report UPI transactions and do we get penalized if we do not report them?

It is a legal obligation to report UPI transactions and if this is not done then there could be penalties, fines, and even higher scrutiny from the tax authorities. Reporting accurately, therefore, should be done in order to meet the stipulated standards and avoid such effects.

Rutuja Khedekar Freelance Copywriter

Rutuja is a finance content writer with a post-graduate degree in M.Com., specializing in the field of finance. She possesses a comprehensive understanding of financial matters and is well-equipped to create high-quality financial content.

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