Here’s a detailed analysis of Sections 269SU and 271DB of the Income Tax Act, 1961, which mandate businesses to accept payments through prescribed electronic modes and impose penalties for non-compliance:
1. Overview of Section 269SU
Objective: To promote a cashless economy by requiring businesses with high turnover to offer low-cost digital payment options.
Applicability:
- Businesses with annual sales/turnover/gross receipts exceeding ₹50 crorein the preceding financial year.
- Includes B2B, B2C, and foreign companies with a Permanent Establishment (PE) in India.
Exemptions: - B2B-only businesses(no retail customers) if 95%+ receipts are non-cash.
- 100% export-oriented units(all receipts via banking channels).
2. Prescribed Electronic Modes (Rule 119AA)
Businesses must provide all three payment facilities:
- RuPay debit cards
- UPI (BHIM-UPI)
- UPI QR Code (BHIM-UPI QR Code)
Key Notes:
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- These are additional to existing payment methods(e.g., NEFT, credit cards).
- No chargescan be levied on customers or merchants for using these modes.
3. Penalty for Non-Compliance (Section 271DB)
- Amount: ₹5,000 per dayof default.
- Authority: Joint Commissioner of Income Tax.
- Grace Period: Businesses had until 31 January 2020to comply; penalties apply from 1 February 2020.
- Defenses: Penalty may be waived if the taxpayer proves “good and sufficient reasons”for non-compliance.
4. Compliance Requirements
- Reporting: Businesses must declare compliance via the Income Tax e-filing portal1.
- Turnover Calculation: Based on gross turnover(excluding GST).
- Foreign Transactions: Applies even to receipts in foreign currency
