As per the Income Tax Act, UPI transactions are categorised as income from other sources under section 56(2).
Nidhi | Jun 10, 2025 |
Income Tax Guidelines on UPI Transaction Limit in Bank A/C
As a part of India’s move towards a cashless economy, Unified Payments Interface (UPI) has played a major role in digital payments. Introduced in 2016, UPI allows users to link different bank accounts to a single smartphone. Nowadays, we do not need physical cash or cards for making payments. UPI allows users to use their smartphones as digital wallets.
Many individuals are using UPI as it is fast, convenient, and free of cost. You can receive or send money without any hurdles. UPI apps such as Paytm, Google Pay, Phone Pe, etc, are very easy to use, which makes it easier for those who are not much familiar with technology. Additionally, this also helps the government to track the transactions.
As per the Income Tax Act, UPI transactions are categorised as income from other sources under section 56(2). Taxpayers are required to disclose all UPI and digital wallet transactions at the time of Income Tax Return (ITR) filing. The income tax department keeps an eye on UPI transactions. Let us understand when UPI transaction is subject to taxation.
The UPI transactions can be taxed if they satisfy the following conditions:
When you are sending or receiving money from friends through UPI or e-wallets, it is important to understand how taxes may apply. If the repayment amount is less than Rs. 50,000 is generally not taxable. If you are repaying a loan or settling a debt with a friend, it is best to keep records of the transaction, in a note or acknowledgement from the other person to prove it was not a gift.
The National Payments Corporation of India (NPCI) has recommended a 1.1% interchange fee on UPI transactions over Rs. 2,000 made by Prepaid Payment Instruments (PPIs). This fee applies only to PPI merchant payments and does not affect regular UPI transactions between individuals or those linked directly to bank accounts.
There is no limit specified in the GST Act for UPI. However, GST registration is required based on your aggregate turnover.
Therefore, if you’re receiving payments via UPI for business purposes, you should track the total yearly amount. If it crosses the applicable threshold, you must register under GST.
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