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2020

Frequently Asked Questions on Section 269SU of the Income Tax Act, 1961

Frequently Asked Questions on Section 269SU of the Income Tax Act 1961

As we all know the Government is pushing towards cashless economy and digital payment. In line with this policy GoI has introduced Section 269SU under the Income Tax Act, 1961. Section 269SU prescribes for accepting payment through certain electronic modes. In this article, we will discuss about some Frequently Asked Questions on Section 269SU.

Q1: What are the provisions for Applicability of Section 269SU?

Section 269SU shall be applicable to following type of persons:

  • Section 269SU is applicable to all Assessee including:
    • Individual;
    •  HUF;
    • Firm;
    • LLP;
    • Company;
    • Having any other status.
  • It is applicable to both residents and non-residents.
  • It is applicable if:
    • they are carrying business; and
    • Total sales, turnover or gross receipts, as the case may be, in business exceeds fifty crore rupees during the immediately preceding previous year.

So current provisions of section 269SU read along with Rule 119AA, will also be applicable to the following categories of assessees:

a) An assessee engaged in B2C business;

Note: the provisions of section 269SU of the Act shall not be applicable to a specified person having only B2B transactions (i.e. no transaction with retail customer/consumer) if at least 95% of aggregate of all amounts received during the previous year, including amount received for sales, turnover or gross receipts, are by other than cash.

b) An assessee which is 100 percent export-oriented (i.e. no domestic sales, and therefore, all payments will always be received through normal banking channels);
c) A foreign company carrying on the business through a Permanent Establishment (PE) in India.

 

Q2: What Turnover Means and does it include GST?

  • In the “Guidance Note on Terms used in Financial Statements” published by ICAI, “the expression “Sales Turnover” has been defined as: “The aggregate amount for which sales are effected or services rendered by an enterprises. The term ‘gross turnover/sales’ and ‘net turnover/sales’ are sometimes used to distinguish the sales aggregate before and after deduction of returns and trade discounts”.
  • In the statement issued by ICAI on the companies (Auditors’ Report) Order 2016 the word ‘turnover’ has been defined as: “The term ‘turnover’ for the purposes of this clause may be interpreted to mean the aggregate amount for which sales are effected or services rendered by an enterprises”.
  • Unless the CBDT clarifies its stand on this matter, it would be appropriate to ignore the amount of GST while calculating the gross turnover or gross receipts.

 

Q3: What is Electronic Mode of Payment or e-payment system?

  • An e-payment system is a way of making transactions or paying for goods and services through an electronic medium, without the use of cheques or cash.
  • It’s also called an electronic payment system or online payment system.
  • Most popular e-payment forms online are credit and debit cards. Besides them, there are also alternative payment methods, Mobile Payment, such as bank transfers, electronic wallets, smart cards etc.

 

Q4: What are prescribed Electronic Mode of Payment?

  • As per section 269SU Business who falls under Section 269SU has to compulsorily provides option to their customers to pay through modes prescribed by CBDT and same will be in addition to other options of electronic payment provided Business.
  • CBDT has vide Notification No. 105/2019-Income Tax [G.S.R. 960(E)] – (30/12/2019) prescribed following additional Modes of payment for the purpose of section 269SU by inserting new Income Tax Rule 119AA:

 

I. Debit Card powered by RuPay:

  • RuPay is a card scheme, conceived and launched by the National Payments Corporation of India (NPCI) on 26 March 2012.
  • It was created to fulfil the Reserve Bank of India’s (RBI) vision to have a domestic, open and multilateral system of payments. RuPay facilitates electronic payment at all Indian banks and financial institutions.
  • Apart from the main private-sector and public-sector banks, RuPay cards are also issued by cooperative banks in the country.

 

II. Unified Payments Interface (UPI) (BHIM-UPI):

  • Bharat Interface for Money (BHIM) is a payment app that lets you make simple, easy and quick transactions using Unified Payments Interface (UPI).
  • You can make direct bank payments to anyone on UPI using their UPI ID with the BHIM app. You can also request money through the app from a UPI ID.

 

III. Unified Payments Interface Quick Response Code (UPI QR Code) (BHIM-UPI QR Code):

  • Bharat QR is P2M (Person to Merchant) Mobile payment solution.
  • This solution is mutually derived among NPCI, Visa and Mastercard payment networks.
  • Once the BQR codes are deployed on Merchant locations, user can pay the utility bills using BQR enabled mobile banking apps without sharing any user credentials to the merchant. It is a quick method of payment.
  • Bharat QR works as an alternate channel of payment, where cardholder has to download his/her bank’s Bharat QR enabled mobile banking app.
  • User has to scan the Bharat QR code at Merchant store and select card to make payment.
  • Once the payment is successful, both cardholder and merchant receive notification in mobile application for successful transaction.

 

Q5: What is the Date of Applicability of Section 269SU?

  • The said provision is made applicable from 1st January 2020.

 

Q6: What is the penal provision, if we have not complied with section 269SU?

  • The Penal provision for non-compliance of Section 269SU is covered by Section 271DB.
  • As per Section 271DB, if the above provision not fulfilled w.e.f. 01.02.2020 penalty of 5,000/- per day would be levied after 01st Feb 2020.
  • However, if the business fulfilled the criteria of install or operationalizes Digital payment system till 31st January 2020 so the penalty would not be levied.

 

Q7: Is provision of Section 269SU will be applicable to foreign companies?

  • As we stated above Section 269SU is applicable to all Assessee whether they are Individual , HUF, Company, LLP or having any other status (irrespective of whether resident or not) therefore this is applicable to foreign company which has PE in India subject to its total sales, turnover or gross receipts exceeds fifty crore rupees during the immediately preceding previous year.

 

Q8: Is there any exception for applicability of Section 269SU?

  • No, till date as such there is no clarification released by Government regarding exceptions for applicability of Section 269SU.

 

Q9: Turnover which needs to be taken into consideration for checking limits of applicability is Gross Turnover or Net Turnover?

  • As stated above in Point No 2, the turnover means the aggregate amount for which sales are affected or services rendered by an enterprise i.e. Gross Turnover.
  • Unless the CBDT clarifies its stand on this matter, it would be appropriate to ignore the amount of GST while calculating the gross turnover or gross receipts.

 

Q10: Can a businessman whose turnover is exceeding Rs 50 cr. received payment by mode of cheque from any client will be allowed under section 269SU?

  • Section 269SU is not putting restriction on using any of the existing mode of receiving payments but it is only making it mandatory for that businessman whose turnover is exceeding Rs 50 Cr. to have those 3 prescribed modes compulsory in their system as an payment option for their customers.
  • Therefore, don’t get confused with any rumors which were there in market regarding putting restriction on other payment modes.
  • You can receive payment by mode of cheque.

 

Q11: At the time of considering the turnover for this section, whether we should consider turnover of entire organization as a whole or consider branch wise or outlet wise?

  • As we mentioned earlier, the turnover means the overall total aggregate turnover.
  • Here turnover of entire organization will be taken into consideration and not for separate branch or outlet wise.

 

Q12: Whether only 1 mode (like UPI QR Code) is sufficient for compliance of law or all three modes is required to implement?

  • As per Notification under rule 119AA, all 3 facilities for accepting payment should be provided.

 

Q13: Is there any monetary limit for receiving payments through these prescribed modes on per day basis like section 269ST or Section 40A(3)?

  • Section 269SU doesn’t prescribed any limit.
  • But the mode prescribed by CBDT has their own monetary limits which you can check on their respective authorized website.

 

Q14: Is there any compulsion on mode for payment for those businessmen who has covered under Section 269SU?

  • Section 269SU is only talk about facility for accepting payments i.e. receipts from customer and not cover anything about payment mode use by those businessmen who are covered under this section.
  • Therefore, in respect of payment they are free to use any mode.

 

Q15: Whether this Section 269SU will apply for any receipt from foreign customer in foreign currency?

  • As per the explanation covered under section, rules, notification and clarification issued by CBDT till date, all the assessee whether resident or not i.e. even covering Foreign company having PE in India within ambit of this section.
  • Further, there is no specific exclusion stated for any receipts from foreign customer, therefore it will be considered as it is also covered under this section.
  • Please note that, you can use BHIM-UPI or BHIM-UPI QR Code outside India to send and collect money for your local accounts. NRI/NRE accounts can be used for the same.

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