The standard UPI transaction limit is Rs 1 lakh per transaction. However, for certain categories, such as capital markets, collections, insurance, and foreign inward remittances, the limit is set at Rs 2 lakh. For Initial Public Offerings (IPOs) and the Retail Direct Scheme, the limit is already at Rs 5 lakh per transaction.
The Reserve Bank of India (RBI) has announced a significant increase in the Unified Payments Interface (UPI) transaction limit for tax payments, raising it from Rs 1 lakh to Rs 5 lakh. This move is expected to make it easier for taxpayers to pay higher tax liabilities swiftly and without the additional charges that often accompany debit and credit card payments. The change is part of the RBI’s ongoing efforts to promote a digitally inclusive economy.
RBI’s Previous Hikes in UPI Limit
This is not the first time that the RBI has raised the UPI transaction limit. In December 2023, the central bank increased the limit to Rs 5 lakh for specific payments, such as those made to hospitals and educational institutions. According to the National Payments Corporation of India (NPCI), the standard UPI transaction limit is Rs 1 lakh per transaction. However, for certain categories, such as capital markets, collections, insurance, and foreign inward remittances, the limit is set at Rs 2 lakh. For Initial Public Offerings (IPOs) and the Retail Direct Scheme, the limit is already at Rs 5 lakh per transaction.
In December 2021, the RBI had previously increased the UPI transaction limit for Retail Direct Scheme and IPO subscriptions to Rs 5 lakh, reflecting the growing trust and adoption of UPI for high-value transactions.
RBI Governor’s Statement on the UPI Limit Increase
In his statement, RBI Governor Shaktikanta Das noted, “Currently, the transaction limit for UPI is Rs 1 lakh except for certain categories of payments which have higher 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.”
The RBI’s “Statement on Development and Regulatory Policies” further elaborates on the decision, highlighting that UPI has become the most-preferred mode of payment due to its user-friendly features. Given that tax payments, both direct and indirect, are frequent and often of high value, increasing the limit for these transactions will significantly benefit taxpayers. The necessary instructions for this change will be issued separately.
Industry Reactions to the Increased UPI Limit
Rahul Jain, CFO of NTT DATA Payment Services India, praised the RBI’s decision, stating, “The Central Bank’s announcement to increase the transaction limit to Rs 5 lakh for tax payments using UPI is a significant move, propelling India towards a digitally inclusive economy. This initiative will strengthen the tax-collection system, reduce costs, and make tax payments more convenient for taxpayers. Additionally, it offers more benefits in terms of seamless, transparent, secure, and easy high-value transactions.”
How the Increased UPI Limit Benefits Taxpayers
For individual taxpayers, the new Rs 5 lakh limit will simplify the process of making various tax payments, such as income tax, property tax, and advance tax, throughout the financial year. This increase in the UPI limit will be particularly beneficial for those with higher tax liabilities, allowing them to complete payments with ease using a UPI-supported app, an active bank account, and a linked mobile number. The process requires only a 4- or 6-digit PIN for payment authorization, streamlining the transaction process.
In contrast, using debit or credit cards for tax payments involves entering card details, CVV, expiration date, and sometimes a one-time password (OTP) for final confirmation—steps that can be more cumbersome compared to UPI.
Other UPI Announcements from the RBI
In addition to the increased UPI limit for tax payments, the RBI has introduced the concept of delegated payments via UPI. This new feature will allow a primary user to set a UPI transaction limit for another individual on their bank account. For example, a family member could be granted access to make payments on behalf of the primary account holder. This development is expected to further expand the reach and usage of digital payments across India, with detailed instructions to follow shortly.
This move by the RBI underscores the growing importance of UPI in India’s digital economy, providing more flexibility and convenience for taxpayers and other users alike.
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