The Reserve Bank of India (RBI) has announced a significant change to the Unified Payments Interface (UPI) transaction limit, increasing it from ₹1 lakh to ₹5 lakh per transaction. This enhancement is designed to provide greater flexibility and convenience for users, particularly for high-value transactions, including tax payments. This adjustment is expected to streamline the payment process for taxpayers with substantial liabilities, making it easier for them to manage their dues.
UPI Transaction Limit Raised for Tax Payments
On Thursday, the RBI revealed the new transaction limit following the conclusion of the three-day Monetary Policy Committee (MPC) meeting. RBI Governor Shaktikanta Das detailed the update, emphasizing that the limit for UPI transactions related to tax payments has been raised to ₹5 lakh. This new limit replaces the previous cap of ₹1 lakh, reflecting a substantial increase intended to accommodate larger financial transactions more efficiently.
Governor Das highlighted the growing popularity of UPI as a payment method due to its seamless and user-friendly features. He explained that while the general UPI transaction limit remains at ₹1 lakh, the RBI has periodically reviewed and adjusted limits for various specific categories, including capital markets, IPO subscriptions, loan collections, insurance, medical, and educational services. Recognizing the frequent and significant nature of tax payments, the RBI decided to elevate the limit for UPI transactions related to taxes to ₹5 lakh. Governor Das assured that further instructions on implementing this change would be issued separately.
Impact of the UPI Transaction Limit Raised on Digital Payments
The decision to raise the UPI transaction limit is expected to have a profound impact on the digital payments landscape. Ranen Banerjee, Partner and Leader of Economic Advisory at PwC India, praised the announcement as a crucial step towards expanding digital payment adoption and enhancing financial inclusion. The increase in the limit is anticipated to facilitate higher-value transactions, benefiting both individual taxpayers and businesses.
For general transactions, the UPI limit remains capped at ₹1 lakh. According to the National Payments Corporation of India (NCPI) FAQ, while standard UPI transactions are restricted to ₹1 lakh, specific categories such as Capital Markets, Collections, Insurance, and Foreign Inward Remittances allow up to ₹2 lakh per transaction. Additionally, Initial Public Offerings (IPOs) and Retail Direct Schemes have a transaction limit of ₹5 lakh.
Rahul Jain, CFO at NTT DATA Payment Services India, commented that the raised limit would strengthen the tax-collection system by reducing transaction costs and making tax payments more convenient. “The increase in the limit will offer taxpayers a more seamless, transparent, and secure way to handle high-value transactions,” Jain noted. This move is expected to improve the efficiency of tax payments and enhance the overall user experience for those managing substantial financial obligations.
In summary, the RBI’s decision to raise the UPI transaction limit to ₹5 lakh represents a significant advancement in digital payment capabilities. By expanding the limit for tax payments and other high-value transactions, the RBI aims to support more efficient financial transactions and contribute to the broader adoption of digital payment methods. This change aligns with the ongoing efforts to modernize and streamline financial systems, offering greater convenience and flexibility for users across various transaction categories.
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