Circular No. 32/2019

Clarifications in respect of prescribed electronic modes under section 269SU of the income tax act 1961

What this is

Circular No. 32/2019 was issued by the Central Board of Direct Taxes on 30 December 2019. Its subject is Clarifications in respect of prescribed electronic modes under section 269SU of the income tax act 1961.

This is a clarification. The Board is stating how it reads a provision. That reading binds the department; it does not bind a court, and where the section says otherwise the section wins.

What it does

Sets out what section 269SU requires and buys the affected businesses a month before penalty starts. A person with business turnover of more than Rs. 50 crore must, from 1 January 2020, provide facilities for accepting payment through the electronic modes prescribed by notification no. 105/2019 dated 30 December 2019, and no bank or system provider may impose any charge, merchant discount rate included, on such a payment, by force of section 10A of the Payment and Settlement Systems Act 2007. The Board clarifies that the penalty of five thousand rupees a day under section 271DB will not be levied if the specified person installs and makes the facility operational on or before 31 January 2020; failing that, the penalty runs from 1 February 2020.

Why it was issued

To allow the specified person sufficient time to install and operationalise the facility for accepting payment through the prescribed electronic modes before the daily penalty begins to bite.

Who it reaches

Businesses with turnover above Rs. 50 crore in the preceding previous year
Banks and system providers levying merchant discount rate on the prescribed modes
Merchants installing UPI and RuPay acceptance infrastructure
Assessing Officers considering penalty under section 271DB

The provisions it speaks to

Left, the provision of the Income-tax Act, 1961 as the instrument itself names it. Right, the section of the Income-tax Act, 2025 that the department’s own concordance maps it to — which is where the same ground is now covered.

Under the 1961 Act	Now
s.269SU	s.187
s.271	s.462

The instrument, as the Board published it

The department publishes this one only as a PDF, so the words below were read out of that PDF by machine. That reading can carry its own mistakes — a misread number, a broken line. Check the signed document before you rely on a figure in it.

F.No.370 142135/2019-TPL
Government of India
Ministry of Finance
Department of Revenue
Central Board of Direct Taxes
****
Circular No. 3212019
Dated: 30'h December, 2019
Sub.: Clarifications in respect of prescribed electronic modes under section
269SU of the Income-tax Act, 1961 - reg.
In furtherance to the declared policy objective of the Government to encourage digital
economy and move towards a less-cash economy, a new provision namely Section 269SU
was inserted in the Income-tax Act, 1961 ("the Act"), vide the Finance ( o. 2) Act 2019
("the Finance Act"), which provides that every person having a business turnover of more
than Rs 50 Crore ("specified person") shall mandatorily provide facilities for accepting
payments through prescribed electronic modes. The said electronic modes have been
prescribed vide notification no. 105/2019 dated 30.12.2019 ("prescribed electronic
modes"). Therefore, with effect from 0 I" January, 2020, the specified person must provide
the facilities for accepting payment through the prescribed electronic modes. Further, Section
lOA of the Payment and Settlement Systems Act 2007, inserted by the Finance Act, provides
that no Bank or system provider shall impose any charge on a payer making payment, or a
beneficiary receiving payment, through electronic modes prescribed under Section 269SU of
the Act. Consequently, any charge including the MDR (Merchant Discount Rate) shall not be
applicable on or after 01 " January, 2020 on payment made through prescribed electronic
modes.

2. In this connection, it may be noted that the Finance Act has also inserted section
271 DB in the Act, which provides for levy of penalty of five thousand rupees per day in case
of failure by the specified person to comply with the provisions of section 269SU. In order to
allow sufficient time to the specified person to install and operationalise the facility for
accepting payment through the prescribed electronic modes, it is hereby clarified that the
penalty under section 271 DB of the Act shall not be levied if the specified person installs and
operationalises the facilities on or before 31" January, 2020. However, if the specified
person fails to do so, he shall be liable to pay a penalty of five thousand rupees ay m
01" February, 2020 under section 271 DB of the Act for sllch failure.
~
(An 0 al)
Under Secretary to the ovt. oflnd ~~
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Copy to:
I. PS to FMI OSD to FMI PS to MoS(F)1 OSD to MoS(F)
2. PPS to Secretary (Revenue)
3. Chairman, CBDT & All Members, CBDT
4. All Pr. DGslTI Pr. CslT
5. All Joint Secretariesl CslTI Directors! Deputy Secretaries! Under Secretaries ofCBDT
6. The C&AG of India
7. The JS & Legal Adviser, Ministry of Law & Justice, New Delhi
8. CIT (M&TP), Official Spokesperson ofCBDT
9. 0 /0 Pr. DGIT (Systems) for uploading on official website
10. JCIT (Database Cell) for upload ing on www.irsofficersonline.gov.in

What to watch

The reprieve is only from penalty; the obligation itself starts on 1 January 2020.
The grace period ended on 31 January 2020, so the shelter this circular gives is spent and penalty for a later default runs from 1 February 2020.
Turnover is tested on the immediately preceding previous year, so a business crossing Rs. 50 crore late does not escape by looking at the current year.
The penalty runs per day of continuing failure, so the exposure grows as long as the facility is not provided.

Where you meet it

In a show cause notice for penalty under section 271DB on a large-turnover business, and in a merchant's dispute with its bank over charges on UPI collections.

On the same provision

Other instruments in this library that name the same provision of the 1961 Act. They are not necessarily still operative, and a later one may have replaced an earlier one without saying so.

Circular No. 12/2020 — Clarifications in respect of prescribed electronic modes under section 269SU of the income tax act 1961 20 May 2020
Notification No. 105/2019 [F.No.370142/35/2019-TPL)] /GSR 960(E) — Ministry of Finance 30 December 2019
Circular No. 5/2018 — Clarification on the immunity provided u/s 270AA of the income tax act 1961 16 August 2018

A circular binds the department, not you and not a court. The Board issues a circular to its own officers. An assessee may hold the department to a circular that helps him; the department cannot hold an assessee to one that hurts him, and the Tribunal and the courts decide the law for themselves.

Source: the Income Tax Department’s own published text — its page for this instrument.

What it means in practice. This page is the instrument. For the question it answers, what the Board decided and what to do about it, see CBDT Circular 32/2019 — s.269SU: UPI and RuPay above Rs 50 crore.