TaxTMI 
TaxTMI 
TaxTMI 
Change in India's Digital Payment Mandate : Clause 187 of the Income Tax Bill, 2025 Vs. Section 269SU of the Income Tax Act, 196
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.... 2) Act, 2019, and operationalized through Rule 119AA of the Income-tax Rules, 1962. The underlying policy objective is to promote digital payments, enhance transparency, and combat tax evasion by reducing the scope for unaccounted cash transactions in large businesses. This commentary undertakes a detailed analysis of Clause 187, examining its scope, language, and implications, and compares it with the existing statutory and regulatory framework u/s 269SU and Rule 119AA. The analysis also considers the practical and compliance implications for stakeholders, identifies potential ambiguities, and explores areas that may require further legislative or judicial clarification. Objective and Purpose The legislative intent behind Clause 187, as....
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.... sales, turnover, or gross receipts exceed Rs. 50 crore in the preceding tax year. The obligation is to provide "facility for accepting payment, through electronic modes as prescribed," in addition to any other electronic modes already provided. * Key Elements * Threshold: The monetary threshold is set at Rs. 50 crore in the "immediately preceding tax year." This ensures that the obligation is confined to medium and large businesses, balancing compliance costs with policy objectives. * Prescribed Electronic Modes: The phrase "as prescribed" defers the specification of electronic modes to subordinate legislation (rules or notifications), allowing flexibility to adapt to technological advancements. * Additionality: The requirement is ....
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....ronic modes" in addition to any other electronic payment facilities. * Difference: Clause 187 refers to the "immediately preceding tax year," whereas Section 269SU refers to the "immediately preceding previous year." While both terms typically refer to the same period under the Income Tax Act, the change in terminology may have interpretive significance, especially if "tax year" is defined differently in the new Bill. * Legislative Continuity: Clause 187 is evidently intended as a reenactment or migration of Section 269SU into the new Income Tax Bill, ensuring continuity of policy. * Rule 119AA of the Income-tax Rules, 1962 * Text: Specifies that every person to whom Section 269SU applies "shall provide facility for accepting paymen....
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....ment Flexibility: Consumers benefit from a wider choice of payment options, particularly those based on domestic payment systems. * Reduced Cash Dependency: The measure reduces the need for cash transactions, promoting a safer and more transparent payment ecosystem. * For Regulators and Tax Authorities * Enhanced Traceability: Digital payments create an audit trail, facilitating better detection of tax evasion, under-reporting, and money laundering. * Enforcement Challenges: Monitoring compliance across thousands of businesses may pose practical challenges, requiring robust reporting and inspection mechanisms. Ambiguities and Issues in Interpretation * Definition of "Prescribed" Modes * Until the relevant rules are notified und....
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....merge (e.g., digital wallets, account aggregators, CBDCs), ensuring future-proofing. However, it also places a premium on timely and transparent rule-making. Potential Areas for Reform or Judicial Clarification * Clarification of Applicability: Guidance may be needed on the application of the threshold to business groups, franchises, and online platforms. * Penalty Provisions: The quantum and nature of penalties for non-compliance should be proportionate and provide for reasonable cause exceptions. * Harmonization with Other Laws: The provision should be harmonized with RBI and sectoral regulations to avoid conflicting obligations. * Consumer Awareness: Efforts should be made to educate consumers about their rights to demand paymen....