Section 269SU — Acceptance of Payment Through Prescribed Electronic Modes

CHAPTER XX-B — REQUIREMENT AS TO MODE OF ACCEPTANCE, PAYMENT OR REPAYMENT IN CERTAIN CASES TO COUNTERACT EVASION OF TAX

Section 269SU — Acceptance of payment through prescribed electronic modes

Case Laws & Commentary — Income-tax Act, 1961 (as amended by the Finance Act, 2026) — bharattax.co Treatise

Status: Live. Inserted by the Finance (No. 2) Act, 2019 (w.e.f. 1-11-2019); facility obligation w.e.f. 1-1-2020. No direct merits case law (candour rule).

Finance Act, 2026: No amendment by the Finance Act, 2026.

Mechanism: Positive duty on a business with preceding-year turnover above Rs. 50 crore to provide prescribed electronic-payment facility (Rule 119AA: RuPay debit card, UPI, UPI QR). Penalty: s. 271DB (Rs. 5,000/day). Companion no-MDR rule: s. 10A of the Payment and Settlement Systems Act, 2007.

Litigation profile: Negligible reported litigation; administered through CBDT circulars. Candour rule applied.

A. COMMENTARY

Genesis and object

Section 269SU was inserted by the Finance (No. 2) Act, 2019 with effect from 1 November 2019, as part of the Government's drive towards a less-cash economy and digital payments. Unlike the rest of Chapter XX-B, it does not bar a cash transaction at all; it imposes a positive obligation on large businesses to make available to their customers the prescribed electronic modes of payment. The mischief addressed is the absence, at many large establishments, of low-cost digital acceptance infrastructure (UPI, RuPay), which kept customers tied to cash and cards carrying high merchant fees.

Who is covered

The obligation falls on "every person carrying on business" whose total sales, turnover or gross receipts in business exceed fifty crore rupees during the immediately preceding previous year. The fifty-crore threshold is tested on the preceding year's figures, so a business crosses into the obligation from the year following the year in which its turnover first exceeds the limit. The section speaks only of business; a profession, however large, is not within its terms.

The prescribed electronic modes

The expression "prescribed electronic modes" is defined by Rule 119AA read with the CBDT notification dated 30 December 2019. The prescribed modes are: (i) Debit Card powered by RuPay; (ii) Unified Payments Interface (UPI) (BHIM-UPI); and (iii) Unified Payments Interface Quick Response Code (UPI QR Code) (BHIM-UPI QR Code). The covered person must provide facility for accepting payment through these modes in addition to any other electronic facility already provided. The facility had to be provided with effect from 1 January 2020.

The companion bar on charges — s. 10A of the Payment and Settlement Systems Act, 2007

Section 269SU works in tandem with a parallel amendment: a new s. 10A of the Payment and Settlement Systems Act, 2007 and a proviso to s. 269SU framework provide that no bank or system provider shall impose any charge (such as MDR — merchant discount rate) on a payer or beneficiary making or receiving payment through the prescribed electronic modes. The legislative scheme is thus two-sided: mandate the acceptance facility (s. 269SU) and make its use free of transaction charges.

Penalty and the grace period

Failure to provide the facility attracts penalty under s. 271DB — five thousand rupees for every day during which the failure continues. The penalty is imposable by the Joint Commissioner, and is subject to a reasonable-cause defence. By Circular No. 32 of 2019, the CBDT provided that no penalty under s. 271DB would be levied if the prescribed facility was installed and made operational on or before 31 January 2020 — a grace window of one month from the 1 January 2020 commencement of the facility obligation.

The B2B exemption

By Circular No. 12 of 2020 the CBDT clarified that s. 269SU is not applicable to a person having only business-to-business (B2B) transactions if at least ninety-five per cent of the aggregate receipts during the previous year are by non-cash modes. The rationale is that the prescribed modes (RuPay debit card, UPI, UPI QR) are essentially retail-customer facing; a wholesale enterprise with no retail customers would gain nothing from being compelled to install them.

Finance Act, 2026 and litigation profile

The Finance Act, 2026 makes no change to section 269SU or to s. 271DB. There is no direct, reported higher-court or Tribunal authority deciding the merits of a s. 269SU obligation or a s. 271DB penalty; the provision is administered largely through the CBDT circulars noted above. The treatment that follows therefore proceeds on the candour rule — the absence of section-specific merits authority is stated plainly rather than concealed by citing inapposite cases, and the governing framework is the statutory text, Rule 119AA and the CBDT circulars.

B. STATUTORY TEXT (verbatim)

Reproduced verbatim from the Income-tax Act, 1961 as amended up to the Finance Act, 2025.

Acceptance of payment through prescribed electronic modes.

269SU. Every person, carrying on business, shall provide facility for accepting payment through prescribed electronic modes, in addition to the facility for other electronic modes, of payment, if any, being provided by such person, if his total sales, turnover or gross receipts, as the case may be, in business exceeds fifty crore rupees during the immediately preceding previous year.

C. AUTHORITIES

Candour rule. There is no reported decision of the Supreme Court, a High Court or the Tribunal adjudicating the merits of a section 269SU obligation or a section 271DB penalty. The provision is operated through the statutory text, Rule 119AA and CBDT circulars. The materials below are the governing administrative instruments and the cognate principle on penalty discretion, not section-specific precedent.

Governing administrative framework (in lieu of merits case law)

Rule 119AA and CBDT Notification dated 30 December 2019

Effect: Prescribes the electronic modes for s. 269SU — Debit Card powered by RuPay; UPI (BHIM-UPI); and UPI QR Code (BHIM-UPI QR Code). Facility to be provided w.e.f. 1 January 2020.

CBDT Circular No. 32 of 2019

Effect: No s. 271DB penalty if the prescribed facility was installed and operational on or before 31 January 2020 — a one-month grace window from the commencement of the obligation.

CBDT Circular No. 12 of 2020

Effect: Section 269SU not applicable to a person carrying on exclusively B2B business where at least 95% of aggregate receipts in the year are by non-cash modes — the prescribed modes being retail-facing.

Section 10A, Payment and Settlement Systems Act, 2007 (companion provision)

Effect: No bank or system provider may levy any charge (e.g., MDR) on payments made or received through the prescribed electronic modes — the no-charge counterpart to the s. 269SU mandate.

Cognate principle — penalty discretion (applied by analogy)

Hindustan Steel Ltd. v. State of Orissa (1972) 83 ITR 26 (SC)

Principle: Penalty is not to be imposed for a technical or venial breach or where the default is bona fide; the authority retains discretion. Applied by analogy to s. 271DB, supporting a reasonable-cause / bona fide-default defence where the facility was provided with a short, explicable delay.

Caution: Cognate principle only — not a decision on s. 269SU / s. 271DB.