The Central Board of Direct Taxes (CBDT) on Sunday warned banks of penal action if they levy any transaction charge on electronic payment modes specified by the government to encourage a cashless economy. It has directed banks that have collected such charges from 1 January 2020 to refund the same to customers, according to a circular issued by the CBDT.
The apex direct tax policymaking body said it has received information that some banks are imposing charges on Unified Payment Interface (UPI) transactions. Some banks allow a specified number of transactions free of charge, beyond which they impose a charge, which CBDT said was a violation of the law.
CBDT said that such practice by banks was a breach of the Payment and Settlement Systems (PSS) Act as well as the Income-tax Act and that it would attract penal provisions under both statutes. The Income-tax Act says that any person who is required to provide the facility of electronic payments through specified modes and fails to do so is liable to a penalty of ₹5,000 a day during the period of such failure.