Penalty of Rs 5000 per day for non-compliance with section 269SU by 31st January 2020

Penalty of Rs 5000 per day for non-compliance with section 269SU by 31st January 2020
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Penalty of Rs 5000 per day for non-compliance with section 269SU by 31st January 2020

Businesses having turnover more than Rs. 50 cr. in the immediately preceding previous year are mandatorily required to provide the facility of digital payments. When section 269SU was made effective on 1st November 2019, it was mentioned that certain digital payment modes will be prescribed. Three digital payment modes are prescribed by inserting a Rule 119AA for compliance section 269SU of the Income-tax Act 1961.  Click here to understand which businesses will fall under the criteria of section 269SU. 

Which are the mandatory digital payment facility required as per section 269SU?

Modes of payment for the purpose of section 269SU are referred to in newly inserted Rule 119AA of Income Tax Rules.

A notification no.105 was issued on 31st December 2019 to amend the Income-tax (16th Amendment) Rules, 2019.

A person, carrying on a business having a turnover of more than fifty crore rupees during the immediately preceding previous year shall mandatorily provide the following facilities for accepting the payment through following electronic modes, in addition to the facility for other electronic modes of payment.

Mandatory three facilities of digital payment are required:-

  1. Debit Card powered by RuPay;
  2. Unified Payments Interface (UPI) (BHIM-UPI); and
  3. Unified Payments Interface Quick Response Code (UPI QR Code) (BHIM-UPI QR Code).

NOTE: Just setting up the facility for accepting the payments through these prescribed digital modes alone will not suffice. The same is required to be confirmed on the Income-tax portal on or before 31st January 2020.

How to confirm the compliance of section 269SU on the Income-tax Portal?

Step 1: Login on Income tax Portal with your login ID credentials and password. 

Step 2:  It will automatically pop up to confirm whether prescribed payment mode details as per Rule 119AA are updated or not. Click continue to confirm. 

https://financepost.in/penalty-of-rs-5000-per-day-for-non-compliance-with-section-269su-by-31st-january-2020/

 

Step 3: Once you click on “continue” in step 2 it will redirect you to the page shown below, you have to select “yes” or “no”. If you select “no” penalty u/s 271DB will be applicable to you. So you should select “yes”. 

Step 4: Once you select “yes” in step 3 it will redirect you to this page where you have to tick mark the digital payment facilities one provides and click on submit. And the compliance u/s 269SU is finished.  

What is the penalty for non-compliance with section 269SU?

Penalty for failure to comply with provisions of section 269SU is governed by section 271DB.

To penalize the businesses for failure to comply with the provisions of section 269SU( i.e provide the facility to accept payments in digital modes) a new penal section 271DB has been inserted in the Income Tax Act,1961 which will impose a penalty of Rs five thousand per day for the period such failure continues.

Note: Such a penalty will not be imposed if the person can prove that there were good and sufficient reasons for such failure.

A circular no. 32  to clarify prescribed electronic modes dated 30th December 2019 was issued for the benefit of the eligible assessees as per section 269SU of the Income Tax Act that the prescribed digital payment facility as per Rule 119AA are installed and made operational on or before 31st January 2020  for accepting the payment.

Note: There is no maximum limit specified for this penalty. Hence, the total penalty will be equivalent to Rs 5000 multiply by the number of days the failure continues.

Difference in penalty section 271DB and Circular no. 32

  • As per circular no. 32, if the specified person (businesses having turnover of more than Rs. 50 crores in preceding previous year ) fails to comply with provisions of section 269SU then the penalty of Rs 5000 per day will be levied from 1st February 2020.
  • But as per sub-section (2) of section 271DB states that the penalty specified in sub-section (1) of section 271DB can only be imposed only by the Joint Commissioner of Income-tax.

 


Sections of Income Tax Act 1961 & Rules of Income Tax Rules for reference

 

Section 269SU of Income Tax Act,1961- Acceptance of payment through prescribed electronic modes

After section 269ST of the Income-tax Act, the section 269SU shall be inserted with effect from the 1st day of November 2019, namely:—

“Every person, carrying on business, shall provide facility for accepting payment through prescribed electronic modes, in addition to the facility for other electronic modes, of payment, if any, being provided by such person, if his total sales, turnover or gross receipts, as the case may be, in business exceeds fifty crore rupees during the immediately preceding previous year.”.

Section 271DB of Income Tax Act,1961 – Penalty for failure to comply with provisions of section 269SU

After section 271DA of the Income-tax Act, section 271DB shall be inserted with effect from the 1st day of November 2019, namely:—

“(1) If a person who is required to provide the facility for accepting payment through the prescribed electronic modes of payment referred to in section 269SU, fails to provide such facility, he shall be liable to pay, by way of penalty, a sum of five thousand rupees, for every day during which such failure continues:

Provided that no such penalty shall be imposable if such person proves that there were good and sufficient reasons for such failure. (2) Any penalty imposable under sub-section (1) shall be imposed by the Joint Commissioner of Income-tax.”.

(2) Any penalty imposable under sub-section (1) shall be imposed by the Joint Commissioner of Income-tax.”.

Section 10A of The Payment and Settlement Systems Act, 2007 – Bank, etc., not to impose a charge for using electronic modes of payment.

After section 10, the section 10A shall be inserted with effect from the 1st day of November 2019, namely:––

“Notwithstanding anything contained in this Act, no bank or system provider shall impose any charge upon anyone, either directly or indirectly, for using the electronic modes of payment prescribed under section 269SU of the Income-tax Act, 1961.”.

Rule 119AA of Income-tax Rules, 1962 – Modes of payment for the purpose of section 269SU

In the Income-tax Rules, 1962, after rule 119A, the following rule shall be inserted, namely:—

“Every person, carrying on business, if his total sales, turnover or gross receipts, as the case may be, in business exceeds fifty crore rupees during the immediately preceding previous year shall provide facility for accepting payment through following electronic modes, in addition to the facility for other electronic modes of payment, if any, being provided by such person, namely:—

(i) Debit Card powered by RuPay;
(ii) Unified Payments Interface (UPI) (BHIM-UPI); and
(iii) Unified Payments Interface Quick Response Code (UPI QR Code) (BHIM-UPI QR Code).”.



 

 

 


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About CA Ankita Khetan 165 Articles
Ankita is a Chartered Accountant in practice and holds a Diploma in IFRS (from ACCA, UK). She is also a Commerce PG and Certified Independent Director (from IICA). She holds a certification in Forex and Treasury Management. Her area of expertise is GST and Income tax. She is passionate about reading, writing, and sharing knowledge on areas related to finance and taxation.

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