In a move aimed at streamlining high-value tax payments, the Reserve Bank of India has increased the transaction limit for tax payments via the Unified Payments Interface or UPI to Rs 5 lakh. This significant hike from the previous Rs 1 lakh cap was announced by RBI Governor Shaktikanta Das on Thursday.
“Currently, the transaction limit for UPI is Rs 1 lakh, except for certain categories of payments that have higher limits. We have decided to enhance the limit for tax payments through UPI to Rs 5 lakh per transaction. This will make it easier for consumers to make tax payments using UPI,” said Governor Das during the announcement.
The UPI transaction limit has undergone periodic reviews and adjustments for various transaction types, including capital markets, IPO subscriptions, and payments for services such as insurance, medical, and education. With this new adjustment, tax payments, which are often substantial, will now benefit from the increased transaction ceiling.
In addition to this enhancement, the RBI introduced a novel feature called ‘Delegated Payments’ within the UPI framework. This feature allows a primary user to authorise a secondary user to conduct UPI transactions from the primary user’s bank account up to a specified limit, without the secondary user needing a separate UPI-linked bank account. This is expected to further drive the adoption of digital payments by enhancing convenience.
Governor Das also reaffirmed that the repo rate remains unchanged at 6.5 per cent, alongside the introduction of several initiatives to enhance the digital lending ecosystem. One of these measures includes establishing a public repository under a regulated entity to ensure accurate credit information.
Lenders are now mandated to report credit information to Credit Information Companies (CIC) every two weeks, which will enable faster updates for borrowers.
Moreover, the RBI is expediting the cheque clearing process, reducing it from two working days to just a few hours, significantly speeding up financial transactions.
Despite keeping the repo rate steady, inflation remains a pressing concern. The inflation rate climbed to 5.08 per cent in June, surpassing the RBI’s target of 4 per cent, with rising food prices being a significant contributor. Governor Das highlighted the importance of price stability for sustained economic growth, emphasizing that monetary policy must remain focused on curbing inflation.
Following the RBI’s announcements, the financial markets responded with some volatility. The 10-year bond yield rose by 2 basis points to 6.88 per cent, while the NSE Nifty 50 Index saw a decline of up to 0.7 per cent. The rupee, however, maintained its stability.
This policy decision arrives in the context of global market fluctuations, particularly following recent interest rate adjustments by central banks in advanced economies, such as the Bank of England and the Federal Reserve.
