All You Need To Know About Taxation of UPI & E-Wallet Transactions shalini advik| Income Tax - Articles

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With the advent of technology in the space of finance, many are switching over to electronic transactions. Not only does it offer ease of use, but it also empowers
individuals to manage their transactions and finances in a flexible manner. The user-friendly nature and the convenience offered by e-wallets and UPI (Unified
Payments Interface) apps aren’t the sole reasons that warrant its use. The world, as we know it, depends on technology for innovation. It’s this dependency that
has established a foundation for the future of personal finance. While the vision of a digital future and the convenience on offer is the sole reason, setbacks like the
coronavirus have fueled its use even further. Another major contributor to the popularity is cashback offers on e-wallet and UPI transactions. Nobody would say no
to the possibility of getting money back for each and every transaction. At the time of reading this, you may have a fair idea of the widespread use of e-wallets and
UPI apps, considering that you and those around are users. But, how big is the e-transaction bubble? Well, UPI transactions in India touched the INR 100-crore
figure in October 2020, according to the National Payments Corporation Of India (NPCI). Not only that, as many as 189 banks can be found on the UPI platform
which recorded as many as 180 crore transactions in September 2020. The overall value of these transactions is estimated to be around INR 3.29 lakh crores. Ads
by ADVERTISEMENT So, what’s the dilemma? Why isn’t everyone adopting e-transactions if it’s ‘the best’ thing to happen to financial dealings? Aside from
obvious facts like access to mobile phones that support e-wallet and UPI apps, and a stable internet connection, perhaps one reason could be taxation? Yes, if
you didn’t know already, e-transactions do attract tax. But like any taxation guidelines proposed by the Income Tax of India, e-transactions have their own. What
are these guidelines and regulations chalked out by the Income Tax Department? Let’s take a look. The IT Department’ Taxation Proposal for e-Wallet and UPI
transactions What’s the underlying principle for taxation, you ask? Where there is income, there is tax. Report this ad Don’t be fooled by the common
misconception that electronic payments, specifically e-wallet and UPI transactions, cannot be tracked by the Income Tax Department. Remember uploading KYC
(Know Your Customer) documents or completing compulsory KYC procedures for banking and finance services? Since an e-wallet or a UPI transaction is
electronic in nature and linked back to your personal details (via KYC), the Income Tax Department tracks every transaction. When filing your Income Tax return
(ITR), you have to abide by certain rules and regulations. To be specific, any income gains like savings, rent, capital bonds, mutual funds, stocks, shares etc.,
have to be mentioned when filing ITR. Similarly, any gains from e-wallet and UPI transactions have to be declared at the time of filing ITR. So, what are some of
the basic guidelines by the IT department for e-transactions? Here are 4 you should know about. Any e-wallet or UPI transaction (transfer of funds) exceeding INR
1 lakh is subject to income tax. Under Section 56(2)(X) of the Income Tax Act, 1961, cashback is taxable if the total exceeds INR 50,000 in a financial year.
According to 3(7)(IV) of the Income Tax Rule, tax is levied on any gift voucher worth more than INR 5,000 that is given to an employee as a gift by the employer
via a UPI transaction. Any vouchers received from friends or family that collectively exceeds INR 50,000 in a financial year is taxable. E-transactions: A Win-Win
for The Government and The Taxpayer? There’s another reason why people are opting for e-transactions through e-wallets and UPI platforms and the government
is pushing more people to do so. As per Section 44AD of Income Tax Act, 1961 a Resident/Firm/HUF that has not claimed tax deduction — under Section 10AA or
80IA tO 80RRB — is required to pay 6% of the turnover or gross as tax if the mode of the transaction is digital, as opposed to 8% for non-digital transactions.
Cross-platform, widely accepted by all banks, quick, convenient, free-to-use, taxpayer-friendly, cashbacks, hassle-free — these are the reasons why UPI and e-
wallet apps are a fan-favourite amongst the masses. For the government, electronic transactions mean more tax collection and a surefire way to limit cash
transactions that are unaccountable and untraceable. As things stand, cash transactions will not ebb away into obscurity; not now anyway. Having said that, given
the nature of e-transactions and the assortment of user-centric benefits it has to offer, the era of a digital ecosystem for financial transactions, widely accepted by
all isn’t too far away.

Read more at: https://taxguru.in/income-tax/taxation-upi-e-wallet-transactions.html

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Income Tax rules on e-wallet or UPI transactions: All you need to

know
Personal Finance
ET Now Digital
Updated Apr 18, 2021 | 11:57 IST
Just as income from sources like Fixed Deposit (FD) or Mutual Funds are taxable; similarly, there is also Income Tax on UPI
transactions.
Income Tax rules on e-wallet or UPI transactions: All you need to know
New Delhi: Transaction via e-wallets and UPI transactions have increased manifold especially during the last couple of
months. In the current times when there are restrictions in respect of withdrawal from same bank ATM, cash transaction
limit, withdrawal charges etc, people prefer to go cashless and use digital wallet or UPI transfers.
There are some implications of these e-wallet or UPI transactions that you need to know. As per income tax rules, reporting
of salary income, income from other sources, capital gains, etc. is mandatory in the income tax return (ITR) filing. Likewise,
funds received via UPI or e-wallets are also required to be put forth while tax filing.
UPI and e-wallets also attract tax. Funds transacted through these modes also are taxable under the Income Tax rules. e-
wallets let you earn cashback rewards which is also one of the reasons why people prefer using wallets from transactions
over cash. Any cashback received directly gets transferred to your bank account. This cashback is taxable if the amount is
above Rs 50,000 in a financial year, under Section 56(2) of the Income Tax Act.
A Unified Payments Interface or UPI lets you do real-time money transfer, it is accessible anytime, enables
payment/collection of money, free of cost and stores multiple bank accounts. Just as income from sources like Fixed Deposit
(FD) or Mutual Funds are taxable; similarly, there is also Income Tax on UPI transactions.
The maximum limit for transferring money is Rs 1 lakh. But, if the transfer exceeds the said limit, the amount is subject to
tax. In case the employers gives a gift voucher of over Rs 5,000 through UPI, then there is tax levied on it as per Income tax
rule 3(7) (iv). Also, other vouchers received from family or friends in a financial year worth over Rs 50,000 are also taxable
income from other sources.
Even if you think that money received from UPI may not get traced, remember that the Income Tax Department of India
traces every transaction, since it is done electronically. If you’re not aware of this, you need to know such funds are also
taxable under the Income Tax rules so as to avoid any trouble later.

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Income Tax rules on EWallet/UPI transactions

February 24, 2021
UPI apps have grown by leaps and bounds. Right from using the e-wallet or UPI for grocery shopping to making a high-end purchase, it is
quick, convenient and easy to perform any cashless transactions. Do you know the Income Tax rules on UPI? Read this article to know
more.

At the time of filing Income Tax Returns (ITR), you do not just need to provide your salary details, but also income received from other
sources like receiving funds from an e-wallet or UPI app. Even if you think that money received from UPI may not get traced, the fact is the
Income Tax Department of India traces every transaction, since it is done electronically.

If you’re not aware of this, you need to know such funds are also taxable under the Income Tax rules.

With the advent of Mobile Banking, the use of UPI apps for digital payments has shot-up tremendously. A Unified Payments Interface or UPI
lets you do real-time money transfer, it is accessible anytime, enables payment/collection of money, free of cost and stores multiple bank
accounts. Just our income from sources like Fixed Deposit (FD) or Mutual Funds are taxable; similarly, there is also Income Tax on UPI
transaction.

Whenever you want to send or receive money through your mobile, you can simply do it with a UPI app. If you have taken funds from any
relative or friend, you can settle the debt easily with an e-wallet. The maximum limit for transferring money is Rs 1 lakh. But, if the transfer
exceeds the said limit, the amount is subject to tax.

These e-wallets let you earn cashback rewards. This is also one of the reasons for people to increase use of the online payment app, as
there is a possibility of getting a cashback. For instance, if you order food at Rs 500 and use UPI for making payment, you may opt for
cashback that directly gets transferred to your bank account. Even cashback is taxable if the amount is above Rs 50,000 in a financial year,
under Section 56(2) of the Income Tax Act.

Another scenario where UPI tax is applicable is when your employer offers a gift voucher, which is above Rs 5,000, it is subject to taxes
under the Income Tax rule-3(7)(iv). Vouchers over the value of Rs 50,000 received from family or friends in a financial year are subject to tax
under the head ‘Income from other sources’.

While Internet Banking and Mobile Banking require a customer to go through a series of steps, UPI is a great alternative to eliminate all of
the stress of sending and receiving money. It is instant and convenient. To get started with a UPI app, all you need is a unique ID, which
holds all the data in an encrypted manner protected by a PIN. This makes the process faster and you do not have to feed in details every
time you perform a transaction.

Considering the latest buzz around the UPIs, ICICI Bank now offers the Unified Payment Interface, which is available in the form of ICICI
Bank iMobile Pay (specifically for ICICI Bank customers) and Pockets (available to both ICICI Bank and Non-ICICI Bank customers).
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Taxation on UPI and E-Wallet transactions

PUBLISHED ON:March 3, 2022PUBLISHED IN:Taxation

Transactions via e-wallets and UPI transactions have accelerated manifold, mostly during the last couple of months. In the current times when there are

restrictions in respect of withdrawal from same bank ATM, cash transaction limit, withdrawal charges etc. Most people conduct cashless transactions like

UPI payments and those made through online wallets. They provide them with certain cashback rewards, and the process appears seamless compared to

traditional bank transfers. However, it is essential to understand that UPI and e-wallets attract tax. The funds transacted through such electronic modes

are taxable under the Income Tax rules.

UPI and E-Wallet Transactions

Transactions via the electronic wallet and integrated payment interface (from now on referred to as “UPI”) have continuosly increased over the last couple

of months. Today’s people, who have ATM limits, withdrawal fees, transaction limits, etc., at the same bank prefer cash-free methods, digital wallets and

UPI variants, which will continue to be a stagnant pass in the future.

A unified payments interface or UPI lets you do real-time money transfers; it is accessible anytime, enables payment/collection of money, is free of cost

and stores multiple bank accounts. However, just as income from sources like Fixed Deposit (FD) or Mutual Funds is taxable, there is also Income Tax on

UPI transactions.

According to NPCI, UPI transactions in India recorded 4.2 billion UPI transactions amounting to Rs 7.71 lakh crore (about $103 billion) were clocked in

October 2021, and 189 banks can be found on the UPI platform, which recorded 3.6 billion transactions worth Rs. 6.5 Lakh crores in September 2021.

As per income tax rules, reporting of salary income, income from other sources, capital gains, etc., is compulsory in the income tax return (ITR) filing. In

addition, funds received via UPI or e-wallets are also required to be put forth during tax filing.

Below are the taxable limits of e-commerce or UPI transactions:

 All electronic wallets and UPI transactions (financing) over INR 1 lakh are income tax.
 In accordance with the Income Tax Act of 1961 Sec 56 (2) (X), cashback will be levied if the total amount for the fiscal year exceeds INR 50,000.
 Taxes are levied on gift certificates of INR 5,000 or more offered by employers as gifts to employees through UPI transactions under Income Tax Regulation 3
(7) (IV).
 Coupons received from friends or family of more than INR 50,000 in the fiscal year is subject to

Benefits of UPI and E-Wallet Transactions

Another reason people choose to transact electronically via e-wallets or UPI platforms is that the government is urging more people to do e-commerce. As

per Section 44AD of Income Tax Act, 1961, a Resident/Firm/HUF that has not claimed tax deduction under Section 10AA or 80IA to 80RRB is required to pay
 6% of the turnover or gross as tax if the mode of the transaction is digital, as opposed to 8% for non-digital transactions. For the government, electronic

transactions mean more tax collection and a surefire way to limit cash transactions that are unaccountable and untraceable.

Some more benefits of UPI Transactions are as follows:

 Cross-platform
 Widely accepted by all banks
 Quick
 Convenient,
 Free-to-use
 Taxpayer-friendly,
 Cashback
 Hassle-free

While filing an Income tax return, income gains from savings, rentals, equity bonds, mutual funds, stocks, stocks, etc., must be mentioned when filing your

income tax return. Similarly, profits from transactions in e-wallets and UPIs must be reported in the ITR submission.

Although the law distinctly states when and how UPI/e-wallets transactions are taxed, there is an ambiguity in the interpretation and application of section

56(2) of the Income-tax Act. Hence, it is rudent to consult your CA or lawyer for a fair understanding of the apposite applicability of income tax rules on

UPI/ e-wallets.