Excess Unaccounted UPI Transactions May Invite Notices From Income Tax/GST Registration!

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The introduction of a Unified Payment Interface (UPI) allows users to transfer money between bank accounts. It is a single-window mobile payment system developed by the National Payments Corporation of India (NPCI). The Unified Payment Interface is a real-time payment system.

Remember that excessive use of UPI and use of UPI for help of your friends, family members, others may land you in trouble. So, keep in your mind below mentioned examples before using UPI and your bank accounts for payment on behalf of others.

Person generally use his/her UPI for making payment on beheld of others for some benefits of reward points or cashbacks , but these incentives are not commensurate with the problem you will face in future, when you receive notice from Income Tax & GST departments for payment of taxes.

Here’s an Example to understand the circumstance:
  1. Mr. Bhim is a individual and he is helping his friends and family members by paying through his UPI or bank accounts of various transactions and asked his family members/friends to deposit cash /transfer cash to his bank account. In this case, suppose for getting incentive of 1 /2% you have transacted in your bank account up to Rs. 40 lakhs or more during the year FY 2020-21. In this case, you’ve earned just Rs. 40000/Rs 80000 as cash incentives but you are liable to GST provisions, since you have crossed threshold limit of Rs. 40 Lakhs, the GST department as well as income tax department will consider your turnover Rs. 40 lakhs or more and income tax asked for payment of presumptive tax or audit of your accounts in case you are not paying theses taxes. This will land you in trouble for sake of small incentives.
  2. Mrs. Astha is a real estate broker and he is serving his clients through booking as well as registration services. He generally asked his clients to deposit /transfer stamp duty and registration charges in his account maintained by him, from where he is paying registration and stamp duty charges to the government. In Mrs. Astha case suppose his turnover in his bank account during FY 2020-21 was Rs. 2 Crores (approx). In this case he has crossed threshold limit of registration of GST and GST department may ask for GST Payment and registration requirements and also Income tax department asked for details of payment received in his bank account. Mrs. Astha in this case has to maintain KYC of each depositor and each client depositing money in his account and this turnover will be shown in his books of accounts. He has to maintain proper books of accounts.
  3. Mr. Chand is doing business of a travel agent and he is using his Credit cards for booking of Airlines tickets directly from website of Airlines. He has done a transaction to the tune of Rs. 74.50 lakhs during the FY 2020-21. In Mr. Chand case since he has done booking of hundred persons , but not able to asked for their KYCs and may received payment through bank as well as through cash. Now the GST and Income Tax Authorities will consider his turnover of Rs. 74.50 Lakhs as turnover during FY 2020-21 and asked for payment of tax. He is liable to register in GST also because his Turnover has crossed Rs. 40 Lakhs, and Income Tax Authorities may ask for presumptive taxation or audit of books of accounts in case lower declaration of Income Tax. After this the department may ask you the source of receipt and payments and this will land you in deep trouble.

The tax authorities are not your relatives and hence they will not show any remorse on you and will levy tax and penalty.

  1. Please note that in above cases you have to prove the sources of income and you have to keep the KYC of payers to produce before the revenue authorities to prove that you are helping your friends and family members and not transacting any business /profession.
  2. Banks are generally required to report suspicious of some specified transaction to the department under provisions of Income Tax Act, 1961.
  3. If you really want to do such types of transactions, then you have to open a Current Account and use the same for your business and helping others, but note that please keep KYC of your depositors and payers to prove that transactions are genuine.
  4. You have to avoid using UPI payments on behalf of others and receiving cash. This will also land you in trouble. Because you are helping in cash transactions ,which are strictly prohibited. Generally some people asked for cash payment against UPI done on behalf of other person. Before doing so you have to ask that person for his/her KYC for your protection.



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