UPI transaction limit increased to Rs. 5 Lakh per transaction for tax payments
The Reserve Bank of India (RBI) recently announced an increase in the limit for Unified Payments Interface (UPI) transactions for tax payments. The decision was taken as part of the RBI’s monetary policy announcement last week. With this, users can now make transactions of up to Rs. 5,00,000 while clearing their tax debts. Earlier, this limit was kept at Rs. 1,00,000. Along with this, the central bank has also proposed the introduction of Delegated Payments in UPI, under which an individual can give a second person access to his bank accounts through UPI up to a specified limit.
RBI increases UPI transactions for tax payments
In a after On X (formerly known as Twitter), the official handle of RBI announced the new UPI change and said, “UPI has become the most preferred mode of payment, owing to its seamless features. Since direct and indirect tax payments are common, regular and of high value, it has been decided to increase the limit for tax payments through UPI from Rs 1 lakh to Rs 5 lakh per transaction.”
The central bank aims to popularize digital payments for tax settlements through this policy change. With a limit of up to Rs. 5,00,000 per transaction, even those with a higher ceiling of tax liabilities can make payments directly through UPI. A major advantage of opting for UPI over traditional methods like credit cards or debit cards is that these transactions attract additional processing charges, which do not exist with UPI.
Notably, UPI transactions for most use cases are kept at Rs. 1,00,000 per transaction. However, a few categories allow a higher limit. Capital markets payments, collections, insurance and foreign remittances have a transaction limit of Rs. 2,00,000, while Initial Public Offering (IPO) transactions are allowed up to Rs. 5,00,000. Tax payments have been added to the last category.
In a press conferenceRBI Governor Shaktikanta Das said the decision to increase the UPI payment limit was taken in the Monetary Policy Committee (MPC) as direct and indirect tax payments are generally routine, regular and high in value. Detailed instructions regarding this change will be issued separately.
In addition to the UPI limit hike for tax payments, the MPC also introduced a new feature called Delegate Payments. According to RBI, it allows an individual who is classified as a primary user to set a UPI transaction limit for a secondary user on the bank account of the primary user.
Simply put, this feature allows an individual to allow a family member to use his bank account via UPI to make transactions up to a specific limit. This can be useful in cases where not every individual in the family has a bank account.
