Effective September 16, 2024, taxpayers across the nation will be empowered to utilize UPI for transactions up to a staggering Rs 5 lakh, a substantial increase from the previous cap of Rs 1 lakh.
In a landmark development poised to reshape the tax payment landscape, the National Payments Corporation of India (NPCI) has announced a sweeping change to the Unified Payments Interface (UPI) transaction limits. Effective September 16, 2024, taxpayers across the nation will be empowered to utilize UPI for transactions up to a staggering Rs 5 lakh, a substantial increase from the previous cap of Rs 1 lakh.
This pivotal adjustment was disclosed in a circular dated August 24, 2024, marking a transformative step in streamlining tax payments and fostering a more inclusive digital economy. By significantly amplifying the per-transaction limit, NPCI aims to simplify the tax payment process and encourage broader adoption of UPI for high-value transactions.
Beyond tax payments, the newly elevated UPI limit will extend to a variety of other crucial transactions, including payments to hospitals, educational institutions, initial public offerings (IPOs), and RBI retail direct schemes. Financial institutions and UPI applications will need to be updated to align with these new thresholds.
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It is crucial, however, for users to confirm with their banks and UPI apps regarding compatibility with this enhanced limit. According to a report from Economic Times, banks, payment service providers, and UPI apps are being instructed to adjust their systems to support the new limit specifically for transactions under MCC 9311, which pertains to verified tax payment merchants.
NPCI has emphasized that it is imperative for acquiring entities to ensure their merchants adhere to this updated framework for tax payments.
"NPCI's announcement to increase the transaction limit to Rs 5 lakh for tax payments using UPI, from Rs 1 lakh earlier, is a significant move, propelling India towards a digitally inclusive economy," remarked Rahul Jain, CFO of NTT DATA Payment Services India.
He further noted that this initiative would refine the tax collection system, curtail operational costs, and provide a more convenient payment mechanism for taxpayers.
While the standard UPI limit for peer-to-peer transactions remains at Rs 1 lakh, banks retain the discretion to set their individual limits. For instance, Allahabad Bank caps UPI transactions at Rs 25,000, while HDFC Bank and ICICI Bank allow up to Rs 1 lakh for peer-to-peer transfers.
Additionally, UPI apps may feature varying transaction limits.
For other types of UPI transactions, such as those related to capital markets, collections, insurance, and foreign inward remittances, the daily cap stands at Rs 2 lakh. Ultimately, the maximum transaction amount available through a UPI app will depend on the specific limits imposed by the user’s bank and the UPI application in use.