Section 187 of the Income Tax Act, 2025 mandates that every person carrying on business or profession with total sales, turnover, or gross receipts exceeding fifty crore rupees during the immediately preceding tax year must provide facilities for accepting payments through prescribed electronic modes.
The Statutory Requirement
Section 187 applies where:
- The person is carrying on business or profession; and
- Total sales, turnover, or gross receipts in such business or profession exceeds fifty crore rupees during the immediately preceding tax year
Prescribed Electronic Modes
Rule 133 of the Income Tax Rules, 2026 specifies the following electronic modes of payment that must be accepted:
- Debit Card powered by RuPay: RuPay debit cards issued by banks
- Unified Payments Interface (UPI) (BHIM-UPI): UPI-based payments
- Unified Payments Interface Quick Response Code (UPI QR Code) (BHIM-UPI QR Code): UPI QR code-based payments
- Tier-III: Full KYC Central Bank Digital Currency wallets, P-CBDC, Wholesale or Cross-border CBDC: CBDC-based payments
These are in addition to other electronic modes of payment that the person may already be providing.
Rationale for the Requirement
The requirement is based on the principle that large businesses should provide digital payment options to their customers. Digital payments offer several benefits:
- Convenience: Customers can pay quickly and easily
- Transparency: Digital payments create audit trails
- Efficiency: Reduced cash handling costs
- Financial Inclusion: Enables participation in the formal economy
The "No Excuses" Principle
The provision ensures that businesses of significant size cannot avoid providing digital payment options. The threshold of ₹50 crore turnover is designed to capture businesses with the capacity to implement digital payment infrastructure.
Scope of Application
Applicable Persons
The requirement applies to:
- Companies: All companies meeting the turnover threshold
- Firms: Partnership firms meeting the threshold
- Individuals: Individual proprietors meeting the threshold
- Other persons: Any person carrying on business or profession meeting the threshold
Applicable Businesses
The requirement applies to all businesses and professions, regardless of the nature of the business activity. This includes:
- Manufacturing businesses
- Trading businesses
- Service providers
- Professional practices
Exclusion
The requirement does not apply to:
- Businesses with turnover below ₹50 crore
- Persons not carrying on business or profession
- Non-profit organisations not engaged in business
Compliance Requirements
Infrastructure
Businesses must have the infrastructure to accept payments through the prescribed electronic modes, including:
- Point of Sale (POS) devices: For accepting card payments
- UPI QR codes: Displayed at payment counters
- CBDC wallets: Enabled for accepting CBDC payments
- Payment gateway: For online payments
Implementation Timeline
The requirement applies from the tax year following the year in which the turnover threshold is crossed. Businesses must ensure compliance before the start of the relevant tax year.
Record Keeping
Businesses must maintain records of payments received through electronic modes. These records may be required for audit purposes.
Consequences of Non-Compliance
Penalty
Rule 452 of the Income Tax Act, 2025 provides for a penalty of ₹5,000 for every day of the duration of failure where a person fails to provide a facility for accepting payments through the prescribed electronic modes.
Disallowance
Failure to comply may also result in disallowance of expenditure under section 36(4) and (5) for payments made in cash.
Practical Considerations
For Businesses
Businesses should:
- Assess compliance: Determine whether the turnover threshold is met
- Implement infrastructure: Set up necessary digital payment infrastructure
- Train staff: Train staff on digital payment acceptance
- Monitor compliance: Regularly monitor compliance
For Tax Professionals
Tax professionals should:
- Advise clients: Advise clients on the requirement
- Review compliance: Review client compliance during audits
- Identify issues: Identify any non-compliance issues
Expert Legal Guidance
Understanding the digital payment acceptance requirement is essential for high-turnover businesses. Anuj Desai & Associates provides expert advisory services on Direct Tax Code compliance, helping businesses understand and comply with the digital payment acceptance requirements.