In a clear indication that the Central government will not change its policy on merchant discount rate (MDR), the Central Board of Direct Taxes (CBDT) has directed banks to return to customers and merchants any fees they may have collected for facilitating Unified Payment Interface (UPI) transactions this year. The CBDT circular, issued on Sunday, noted that such charges are a violation of the Income Tax Act, and would attract penal provisions. The circular noted that per Section 10A of the Payment and Settlement Systems (PSS) Act 2007, UPI payments and RuPay debit card-powered transactions could not attract any charges. It said that a circular issued in December 2019 had reiterated that under Section 10A, merchant discount rates (MDR) would not be applicable from January 1, 2020. It read: "However, representations have been received that some banks are imposing and collecting charges on transactions carried out through UPI [...] Such practice on part of banks is a breach of section 10A of the PSS Act as well as section 289SU of the IT Act." The banks were directed to immediately refund any charges they may corrected this year. Banks charging fees on money 'transfers' would have to stop Of late, banks such as including ICICI, HDFC and Axis had started collecting fees on money transfers for after the first 20 person-to-person (P2P) transactions in a month. Ashish Das of the Department of Mathematics, IIT Bombay wrote in a report in August 2020 that banks were doing this by defining "payments" as…
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