New Delhi: Merchant Discount Rates (MDR) will no longer be charged on digital transactions. If MDR charge is deducted on any transaction after January 1, 2020, then banks will refund it to the customers. The Central Board of Direct Taxes (CBDT) has instructed the banks in this regard.
The Central Government had issued a circular in December last year stating that from January 1, 2020, no other charges including MDR will be levied on payments made through electronic mode. In fact, the government has taken this decision to promote digital transactions in the country.
The instruction issued by CBDT states that some banks are charging certain charges on payment through UPI (Unified payment Interface). This means charges are being levied from the customers after a fixed limit transaction. If banks are continuing to do so then they are violating the rules and necessary action may be taken against them.Elimination of all charges were brought to be in effect after January 1, 2020 as soon as possible.
MDR- The fees that are charged when making debit, credit card or digital payments. It is a fee charged for the facility of payment through debit or credit card. The amount received from MDR (Merchant Discount Rate) is not received by the shopkeeper. He has to pay MDR for every payment made with the card.
CBDT has issued Circular no. 16/2020 on 30th August, 2020 advising banks to immediately refund the charges collected, if any, on or after 1st January, 2020 on transactions carried out using the electronic modes prescribed under section 269SU of the Income-tax Act,1961.(1/2) pic.twitter.com/Dw0D5oVi8T
— Income Tax India (@IncomeTaxIndia) August 30, 2020
UPI- With the help of UPI one can transfer money to anyone’s account.UPI helps one to use many apps like BHIM, Phone Pay, Google Pay, Mobikwik and Paytm. At present the maximum limit for transferring funds through UPI is Rs. 1 lakh. However, it is different for different banks.