UPI Transaction Limits & Tax Rules in 2025: A Complete Guide
The Unified Payments Interface (UPI) has transformed digital payments in India, making transactions seamless and cashless. However, with increased UPI usage, the Income Tax Department and GST regulations have set specific limits and tax rules that users must follow.
Key UPI Transaction Limits Under Income Tax (2025)
- ₹50,000 Threshold – Any amount received above ₹50,000 via UPI (excluding business transactions) is taxable under Section 56(2) as “Income from Other Sources.”
- Gifts & Cashbacks – Cashbacks and vouchers above ₹5,000 received from employers are taxable.
- ₹1 Lakh Limit – Transactions exceeding ₹1,00,000 may attract scrutiny from tax authorities.
- Repayments Between Friends – Amounts below ₹50,000 are tax-free, but proper documentation is advised.
Interchange Fees on UPI Transactions
- 1.1% Fee applies only on Prepaid Payment Instrument (PPI) merchant transactions above ₹2,000.
- No extra charges for peer-to-peer (P2P) or bank-linked UPI payments.
UPI & GST Regulations
While UPI itself has no GST limit, businesses must register for GST if their annual turnover crosses:
- ₹40 Lakhs (for goods)
- ₹20 Lakhs (for services)
Note: Frequent high-value UPI transactions may push businesses over these thresholds.
Why Compliance Matters
- Income Tax Department actively monitors UPI transactions.
- Undisclosed UPI receipts can lead to tax notices.
- Businesses must track UPI payments to avoid GST registration delays.
Final Advice
- Keep records of large UPI transactions.
- Report all taxable receipts in your ITR.
- Monitor business turnover if using UPI for sales.
