The Direct Tax Code (DTC) 2025 mandates that specified persons must provide facilities for accepting payments through prescribed electronic modes. This requirement has significant implications for fintech merchants and platforms. This guide analyses the digital payment mandate, the ₹50 crore turnover test, and the prescribed electronic modes.
The Digital Payment Mandate Framework
Section 187 — Mandatory Digital Payment Facility
Section 187 of the DTC provides that every person carrying on business or profession shall provide facility for accepting payment through electronic modes as may be prescribed, in addition to other electronic modes, if any, being provided by him, where:
- Such person is carrying on business or profession
- 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 prescribes the following electronic modes:
- Debit Card powered by RuPay
- Unified Payments Interface (UPI) (BHIM-UPI)
- Unified Payments Interface Quick Response Code (UPI QR Code) (BHIM-UPI QR Code)
- Tier-III: Full KYC Central Bank Digital Currency wallets, P-CBDC, Wholesale or Cross-border CBDC
Additional Electronic Modes
Rule 48 provides a comprehensive list of other electronic modes recognised under the DTC, including:
- Credit Card
- Debit Card
- Net Banking
- IMPS (Immediate Payment Service)
- UPI (Unified Payment Interface)
- RTGS (Real Time Gross Settlement)
- NEFT (National Electronic Funds Transfer)
- BHIM (Bharat Interface for Money) Aadhaar Pay
Applicability to Fintech Merchants
When Does the Mandate Apply?
The digital payment mandate applies to fintech merchants if:
- The fintech merchant is carrying on business or profession
- The total sales, turnover or gross receipts in such business or profession exceeds ₹50 crore during the immediately preceding tax year
Who is a Fintech Merchant?
A fintech merchant is any person who:
- Operates a payment platform or gateway
- Accepts payments through digital channels
- Facilitates payment transactions
- Provides financial technology services
Examples of Fintech Merchants
- Payment gateway providers
- E-commerce platforms
- Digital wallet providers
- Peer-to-peer lending platforms
- Invoice financing platforms
- Buy now, pay later platforms
Prescribed Electronic Modes
1. RuPay Debit Card
RuPay is India's indigenous payment network. Merchants must provide the facility to accept payments through RuPay debit cards.
2. UPI (BHIM-UPI)
Unified Payments Interface (UPI) is a real-time payment system. Merchants must provide the facility to accept payments through UPI.
3. UPI QR Code (BHIM-UPI QR Code)
Merchants must display UPI QR codes for customers to scan and pay.
4. CBDC Wallets
Central Bank Digital Currency (CBDC) wallets, including:
- P-CBDC (Retail CBDC)
- Wholesale CBDC
- Cross-border CBDC
Compliance Requirements
Infrastructure Setup
Fintech merchants must:
- Set up the infrastructure to accept payments through prescribed electronic modes
- Display payment options prominently
- Provide prescribed modes in addition to other electronic modes
Additional Requirements
Merchants must:
- Ensure all prescribed modes are functional
- Display acceptance of these modes prominently
- Train staff on accepting these modes
- Maintain records of digital payments accepted
Section 186 — Mode of Undertaking Transactions
Section 186 prohibits receipt of amounts of ₹2,00,000 or more except through specified banking or online modes. This is in addition to the digital payment mandate under Section 187.
Practical Compliance
1. Assess Applicability
- Calculate total sales, turnover or gross receipts for the tax year
- Determine if the threshold (₹50 crore) is met
- If met, ensure compliance for the next tax year
2. Set Up Infrastructure
- Install RuPay POS machines
- Display UPI QR codes
- Enable CBDC wallet acceptance
- Ensure all modes are functional
3. Display Payment Options
- Display acceptance of RuPay debit cards
- Display UPI acceptance
- Display UPI QR codes
- Display CBDC wallet acceptance
4. Train Staff
- Train staff on accepting payments through prescribed modes
- Ensure staff can assist customers with digital payments
- Train staff on troubleshooting issues
5. Maintain Records
- Maintain records of digital payments accepted
- Track compliance with the mandate
- Maintain records for audit purposes
Consequences of Non-Compliance
Section 452 — Penalty
Section 452 provides that the Assessing Officer may impose 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 of payment.
Disallowance of Expenditure
Section 36(4) and (5) provide that where any payment or aggregate of payments made in a day to a person exceeds ₹10,000 and is not made through specified banking or online mode, the expenditure by way of such payments shall not be allowed as a deduction.
Other Consequences
Non-compliance may also result in:
- Adverse observations in tax audits
- Reputational damage
- Regulatory action
Exemptions
Government Notification
The Central Government may, by notification, exempt any class of persons from the requirement, subject to conditions.
Expert Legal Guidance
Anuj Desai & Associates provides comprehensive legal advisory services on digital payment mandate compliance for fintech merchants. Our direct tax experts help merchants understand their obligations, set up compliant systems, and navigate the regulatory framework. We assist in applicability assessment, infrastructure setup, and representation before income-tax authorities.
Disclaimer: This article provides general information and does not constitute legal advice. For specific guidance on digital payment mandate compliance or any other direct tax matter, please consult qualified legal professionals.
Need Expert Legal Guidance?
Navigating the digital payment mandate framework requires experienced legal counsel. At Anuj Desai & Associates, we provide comprehensive direct tax advisory services, including:
- Applicability Assessment: Evaluation of digital payment mandate obligations
- Infrastructure Setup: Guidance on setting up compliant payment infrastructure
- Penalty Defence: Representation in penalty proceedings
- Compliance Review: Review of digital payment compliance
Contact us for expert legal guidance on your digital payment mandate compliance matters.