New Delhi: In a significant move aimed at boosting digital tax payments, the National Payments Corporation of India (NPCI) has announced an increase in the UPI per-transaction limit for tax payments to ₹5 lakh, effective from August 24, 2024. This substantial hike, from the previous limit of ₹1 lakh, is set to simplify the tax payment process and encourage more taxpayers to utilize UPI for higher-value transactions.
Broader Applicability to Healthcare, Education, and Investments
The raised UPI limit isn’t limited to tax payments alone. The NPCI clarified that this new threshold would also apply to payments made to hospitals, educational institutions, for Initial Public Offerings (IPOs), and even for the Reserve Bank of India’s (RBI) retail direct schemes. This expansion positions UPI as a versatile tool for both routine and significant financial transactions.
Compatibility Checks for Banks and UPI Apps
While the announcement holds promise, users are advised to verify their bank’s and UPI app’s compatibility with the new ₹5 lakh limit. Not all banks or payment apps may immediately support this change. According to The Economic Times, banks and UPI service providers have been instructed to adjust their systems to accommodate this higher limit specifically for verified tax payment merchants, categorized under MCC 9311.
Industry Response: A Boost to Digital Economy
Rahul Jain, Chief Financial Officer of NTT DATA Payment Services India, hailed the initiative as a major step toward a digitally inclusive economy. “This increase will not only enhance the efficiency of the tax collection system but also reduce costs and offer a more convenient, user-friendly method for taxpayers,” Jain remarked. The move aligns with India’s broader goal of transitioning to a cashless economy, where digital transactions become the norm for both individual and institutional payments.
UPI Limit Variations: Peer-to-Peer and Specialized Transactions
Despite this increase for tax payments, the standard UPI transaction limit for peer-to-peer transfers remains at ₹1 lakh. However, limits vary across banks. For instance, Allahabad Bank allows only ₹25,000 per UPI transaction, while HDFC Bank and ICICI Bank permit up to ₹1 lakh. Moreover, certain high-value transactions, such as those related to capital markets, collections, insurance, and foreign remittances, continue to have a daily cap of ₹2 lakh.
As the financial ecosystem adjusts to these updates, both users and merchants will need to stay informed and ensure they are using platforms that accommodate these new limits. The broader implementation of this policy could play a vital role in streamlining India’s financial infrastructure and making high-value transactions more accessible for the common citizen.
