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In today’s digital era, Unified Payments Interface (UPI) apps like Paytm, PhonePe, and Google Pay have revolutionized how we handle financial transactions. From small grocery bills to big-ticket purchases, UPI has become the go-to payment mode for millions. But did you know that excessive transactions through these platforms could land you on the radar of the Income Tax Department?

Income Tax Rules You Must Know for UPI Payments

The Income Tax Department has laid down specific guidelines to monitor digital and cash transactions. As per Section 269ST of the Income Tax Act, if a person receives an amount exceeding ₹2 lakh in a single day from a single source or person, they could receive a tax notice or face a potential investigation.

These rules are designed to discourage black money, curb fraudulent activities, and promote financial transparency.

When Could You Face Trouble?

Here are some cases where transactions above ₹2 lakh may lead to an income tax inquiry:

• Receiving over ₹2 lakh in a day, whether through a single or multiple UPI transactions, from one individual or organization.

• Making high-value cash or digital payments without proper documentation.

• Conducting transactions without maintaining valid bills or receipts, especially when dealing in high-value goods or property.

Apart from Section 269ST, the Income Tax Act includes other related provisions like:

• Section 40A(3) – governs cash payments in business transactions.

• Section 43 – pertains to depreciation and other business-related tax calculations.

• Section 269SS – restricts loan or deposit transactions in cash beyond a certain limit.

How to Stay Safe and Avoid Income Tax Notices

To steer clear of legal trouble and tax scrutiny:

• Always maintain bills or transaction proofs, whether it’s a cash or UPI payment.

• Avoid splitting high-value payments into multiple transactions to bypass the ₹2 lakh cap.

• Stay transparent about the source and purpose of large transactions.

• Prefer bank transfers or official digital modes that provide a valid audit trail.

Bottom Line

The ease of using UPI apps shouldn't blind us to the legal compliance required in high-value transactions. If you're regularly using apps like Paytm, PhonePe, or Google Pay for large payments, it's essential to be aware of these limits and keep proper documentation. A little caution can save you from receiving an unexpected notice from the Income Tax Department.

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