RBI Hikes UPI Limit for Tax Payments to Rs 5 Lakh from Rs 1 Lakh

In a significant move to simplify tax payments for millions of Indians, the Reserve Bank of India (RBI) has proposed increasing the Unified Payments Interface (UPI) transaction limit for tax payments from Rs 1 lakh to Rs 5 lakh. This hike is expected to streamline the tax payment process, making it quicker and more convenient for taxpayers with higher liabilities.

Enhancing UPI Limits: A Historical Perspective

The RBI's decision to raise the UPI limit for tax payments is not unprecedented. In December 2023, the central bank increased the UPI transaction limit to Rs 5 lakh for specific payments, including hospital bills and educational fees. According to the National Payments Corporation of India (NPCI), while the general UPI transaction limit is Rs 1 lakh, higher limits have been set for certain transactions like capital markets, collections, insurance, and foreign inward remittances.

RBI Governor's Statement: Simplifying Tax Payments

RBI Governor Shaktikanta Das highlighted the rationale behind this move, stating, "Currently, the transaction limit for UPI is Rs 1 lakh except for certain categories of payments which have higher transaction limits. It has now been decided to enhance the limit for tax payments through UPI from Rs 1 lakh to Rs 5 lakh per transaction. This will further ease tax payments by consumers through UPI."

In the Statement on Development and Regulatory Policies, the RBI emphasized the widespread adoption and seamless features of UPI, noting that the transaction limit had been periodically reviewed and enhanced for various use-cases. The enhancement of the UPI limit for tax payments is aimed at accommodating the regular, high-value nature of direct and indirect tax payments.

How the New UPI Limit Benefits Taxpayers

The proposed hike in the UPI limit is expected to significantly benefit individuals making various tax payments, such as income tax, property tax, and advance tax. With the new limit, taxpayers can easily make high-value transactions using UPI-supported apps, active bank accounts, and mobile numbers linked to those accounts. The simplicity of UPI transactions, which only require entering a 4 or 6-digit PIN, contrasts with the more cumbersome process of using debit or credit cards, which often involve entering card details, CVV, expiry date, and even OTPs.

Additional UPI Announcements: Delegated Payments

In addition to the limit hike, the RBI has announced the introduction of delegated payments via UPI. This feature will allow a primary user to set a transaction limit for another individual, such as a family member, enabling them to access the primary user's bank account for UPI payments. This development is expected to further expand the reach and usage of digital payments across the country.