There is income tax on UPI transactions. As per Income tax rules, income from other sources, capital gains and salary is taxable and mandatory in the income tax return filing. Any income gains like savings, rent, capital bonds, mutual funds, stocks, shares etc., have to be mentioned when filing ITR. People prefer these e-wallets as it attracts more discounts, cashback and easy payment. UPI has become extremely popular now a days. But there are some things that you need to know before using any e-wallet.

NOTE- Money received through UPI transactions is traceable. The Income Tax Department of India trace every transaction. If someone won’t pay their taxes, then it’s punishable.

Here are list of things people should take into consideration before using any e-wallet.

  1. The cashback is taxable if the amount is more than Rs 50,000 in a financial year, under Section 56(2) of the Income Tax Act.
  2. The maximum limit for transferring cash is Rs 1 lakh. If the amount exceeds, then  the amount is subject to tax
  3. In case, if the employers give a gift voucher of Rs 5000 through UPI, then  the tax will also be levied under the income tax rule 3(7) (iv)
  4. Vouchers received from family or friends over Rs 50,000 in a financial year are also taxable and considered income from other sources.


With the advancement of technology in the financial sector, many people are opting for electronic transactions. It not only makes it simple to use, but it also allows people to handle their transactions and funds in a more flexible way. Cashback incentives on e-wallet and UPI purchases are another key factor in the popularity. Nobody would turn down the opportunity to get money back for every transaction. The ease of use and convenience provided by e-wallets and UPI (Unified Payments Interface) apps aren’t the only factors that justify their adoption. For innovation, the world as we know it is reliant on technology. This dependence is what has laid the groundwork for personal finance’s future. While the promise of a digital future and the convenience it provides is the primary motivation, failures such as the coronavirus have spurred its use even more.


According to the National Payments Corporation of India, UPI transactions in India reached INR 100 billion in October 2020. (NPCI). Not only that, but the UPI network now has 189 banks on board, with 180 crore transactions logged in September 2020. These deals are expected to be worth about INR 3.29 lakh crores in total.


Another reason why individuals are choosing for e-transactions via e-wallets and UPI platforms, and the government is encouraging them to do so. A Resident/Firm/HUF that has not claimed a tax deduction is obliged to pay 6 percent of the turnover or gross as tax if the method of transaction is digital under Section 10AA or 80IA to 80RRB, as opposed to 8 percent for non-digital transactions, as per Section 44AD of the Income Tax Act, 1961. UPI and e-wallet applications are popular among the public because they are cross-platform, generally recognised by all banks, quick, convenient, free-to-use, taxpayer-friendly, offer cashbacks, and are hassle-free. For the government, electronic transactions promise increased tax revenue and a guaranteed means to curb unaccountable and untraceable cash transactions.

Cash transactions aren’t going away anytime soon, at least not right now. Given the nature of e-transactions and the variety of user-centric benefits they provide, the era of a universally recognised digital environment for financial transactions isn’t far off.


In some cases, income created from such gifts may trigger provisions for income clubbing under the Income-tax Act, and it may be taxed according to the appropriate regulation. So, receiving presents from friends and family is wonderful, but keep in mind the relevant taxes. If you receive a gift certificate from your employer for whatever reason and the value of the voucher exceeds Rs 5,000, it is taxable under income tax rule-3(7) (iv). Gift certificates received from friends and family in excess of Rs 50,000 in a financial year, on the other hand, are taxed under the heading of “income from other sources.”

But, income received from relatives such as a spouse, siblings, children, or any lineal ascendant or descendant of the individual or the individual’s spouse is tax-free.

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