Section 187 of the Income-tax Act, 2025 — Mandatory Acceptance of Payment Through Prescribed Electronic Modes (UPI/RuPay)

In plain language

What Section 187 actually says

Section 187 has nothing to do with transfer pricing. It is the successor to Section 269SU of the old Income-tax Act, 1961, and it deals with mandatory acceptance of digital payments. In plain words: if you run a large business or profession, you must give your customers a way to pay you electronically through the specific modes the Government prescribes — such as BHIM-UPI, UPI QR code and RuPay debit cards — and you cannot charge them for using those modes.

The exact wording requires every person carrying on business or profession, whose total sales, turnover or gross receipts exceed ₹50 crore during the immediately preceding tax year, to provide a facility for accepting payment through prescribed electronic modes, in addition to any other electronic modes already being offered.

Who this applies to

• Large taxpayers only. The ₹50 crore turnover/gross-receipts threshold is tested on the immediately preceding tax year (previous year). If you crossed ₹50 crore last year, you must offer the facility this year.
• Business AND profession. A notable widening from the old law: Section 269SU (1961) applied only to a person "carrying on business." Section 187 (2025) reads "business or profession," so large professional firms (for example, big consultancy, legal or medical set-ups) also fall within its net.
• Not for small taxpayers. If your turnover is at or below ₹50 crore, this section does not compel you to install any particular payment mode.

What "prescribed electronic modes" means

The section itself does not list the modes — it leaves them to be prescribed by the CBDT through rules/notifications (carried over from Rule 119AA and Notification 105/2019 under the 1961 regime). The historically prescribed modes are:

• Debit card powered by RuPay
• Unified Payments Interface (UPI) — BHIM-UPI
• UPI Quick Response Code — BHIM-UPI QR Code

You may offer other modes (credit cards, Visa/Mastercard debit, wallets, NEFT) as well, but you must at minimum provide the prescribed low-cost modes.

No charges — the "zero MDR" rule

A key protection sits outside the Income-tax Act, in Section 10A of the Payment and Settlement Systems Act, 2007. It says no bank or system provider may impose any charge — directly or indirectly, including Merchant Discount Rate (MDR) — on a payer or the merchant for transactions made through the prescribed modes. So a customer paying you via BHIM-UPI or RuPay debit card pays nothing extra, and you as the merchant bear no MDR on those specific rails.

Penalty for non-compliance — Section 452

• Failure to provide the facility attracts a penalty under Section 452 of the 2025 Act (the successor to Section 271DB of the 1961 Act).
• The penalty is ₹5,000 for every day during which the failure continues.
• The penalty is not automatic: it will not be levied if you prove there were good and sufficient reasons for the failure. It is imposed by the Joint Commissioner (a senior officer), not the assessing officer alone.

How it interacts with related sections

• Section 452 is the penalty engine that gives Section 187 its teeth.
• It complements the cash-discouragement provisions (limits on cash receipts and cash expenditure) — the whole scheme nudges the economy toward a digital, traceable payment trail.
• It sits alongside TDS/reporting requirements: digital acceptance creates a clean audit trail that dovetails with the Act's information-reporting framework.

Practical implications

• Effective 1 April 2026 under the new Act. Large firms should confirm a live UPI/RuPay acceptance channel (a UPI QR at the counter or a payment gateway online is usually enough).
• Compliance is cheap: displaying a BHIM-UPI QR code that routes to your business account generally satisfies the requirement, and there is no MDR cost.
• Keep evidence (screenshots, merchant onboarding records) showing the facility was live, in case a "good and sufficient reason" defence is ever needed.