UPI Transactions / Do you make such payments through UPI every day? You may get a tax notice!

Nowadays, digital payments of ₹100-₹200 are common, but such transactions every day can amount to lakhs in a year. If this money is received in exchange for service or work, then it can be considered as income. The Income Tax Department keeps an eye on such fixed patterns, so correct information in ITR is important.

UPI Transactions: Nowadays, digital payment has become an integral part of our daily life. Paying ₹100 to the tea vendor, ₹200 to the vegetable vendor or ₹500 for any household service has now become common. People often wonder why anyone would notice such a small amount. But if these small transactions keep happening every day, then at the end of the year their figure can be surprising.

Big impact of small transactions

Suppose, you pay ₹400 every day through Paytm, Google Pay or any other UPI app. This amount becomes ₹12,000 in a month, and in a year this figure can reach ₹1,44,000. If this money is being given or taken in exchange for any service, work or small business, then it can be seen as income. In such a situation, it becomes necessary to mention these transactions in the Income Tax Return (ITR).

Keeping an eye on transactions with a fixed pattern

The Income Tax Department not only pays attention to large transactions, but also looks closely at the pattern of transactions. If a person repeatedly sends or receives a certain amount to the same account or to different accounts, it may indicate that some income or service-related activity is going on. The Income Tax Department can check where the money is coming from and what is its purpose.

Data from banks and UPI apps reaches the Income Tax Department through the National Payments Corporation of India (NPCI) and banks. This data helps in understanding the nature and frequency of transactions. Therefore, even though small payments of ₹ 100-₹ 200 may seem minor, if these are happening regularly, they may come under the radar of tax officials.

Are all transactions taxable?

Not every digital payment forms the basis for tax. If your total income is less than the minimum tax limit, and these payments are for groceries, milk, vegetables or other household expenses, then there is no need to worry. However, if you are receiving digital payments for any service, such as tuition, freelance project or small business, then it is necessary to consider it as income and disclose it in ITR.

For example, many people teach tuition on a small scale, do freelance designing or provide other services, and in return take payment through Google Pay or Paytm. If this income exceeds the tax limit by adding to your total income, then it is mandatory to include it in ITR.

Why is correct information necessary in ITR?

While the Digital India initiative has increased facilities, accountability has also increased. The Income Tax Department now keeps an eye not only on large transactions, but also on small and regular transactions. It sees how often, from where and through which medium the money is coming. In this age of digital data, the tax system has become more granular and data-driven than ever before.

Therefore, if you are making or receiving payments through digital means, it is better to provide complete and correct information while filing ITR. Honest disclosure of income prevents the possibility of notices or penalties from the Income Tax Department in the future. Also, it keeps you in financial discipline and ensures compliance with tax rules.