Concluding its monetary policy committee (MPC) meeting on Thursday, August 8, 2024, the Reserve Bank of India (RBI) announced increasing the UPI transaction limit for tax payments from Rs 1 lakh to Rs 5 lakh, which is expected to ease the taxpayers’ payment-related issues.

Announcing its decision, RBI Governor Shaktikanta Das said, “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 to Rs 5 lakh per transaction.”

Also Read: The 4% Rule In A 10% Inflation Economy!

UPI Transaction Limits

Unified Payments Interface, or UPI, created by the National Payments Corporation of India (NPCI), is a 24×7 instant payment system between two parties. UPI’s popularity grew buoyed by the significant penetration of smartphones in India over the years. As of July 2024, UPI transactions in India totalled around Rs 20 trillion, growing at 45 per cent year-on-year.

However, the daily UPI transaction limit on the total amount and the number of payments are defined for regular and special category cases.

For instance, according to the ICICI Bank’s website, the upper transaction limit and cumulative amount per day set by NPCI are currently Rs 1 lakh, while the maximum number of daily is 20, as long as the cumulative amount sent does not exceed Rs 1 lakh.

For special category transactions like insurance, capital market, collections, and foreign inward remittances, the transaction limit is Rs 2 lakh. Further, for an initial public offering and retail direct scheme, NPCI has set the limit to Rs 5 lakh per transaction.

Also Read: With No Increase In Ayushman Bharat Budget, Insurance Coverage For All Seniors Over 70 Remains Illusive

What Has Changed?

UPI has become a preferred mode of payment among the masses in India due to its ease of operation. Given its popularity, the MPC decided to enhance the transaction limit for tax payments to Rs 5 lakh for taxpayers’ ease.

In this regard, an MPC statement notes, “Based on the various use cases, the Reserve Bank has periodically reviewed and enhanced the limits for a few categories like capital markets, IPO subscriptions, loan collections, insurance, medical and educational services, etc.

“As direct and indirect tax payments are common, regular, and high-value, it has been decided to enhance the limit for tax payments through UPI from Rs 1 lakh to Rs 5 lakh per transaction. Necessary instructions will be issued separately.”