RBI Raises UPI Limit to Rs. 5 Lakh for Tax Payments, Introduces Delegated Payments Feature

The Reserve Bank of India RBI recently announced an increase in limit of Unified Payments Interface (UPI) transactions for tax payments. The decision was made as a part of RBI's Monetary Policy announcement last week. With this, users can now transact up to Rs. 5,00,000 while settling their tax liabilities. Earlier, this limit was kept at Rs. 1,00,000. Additionally, the central bank has also proposed the introduction of Delegrated Payments in UPI, which will allow an individual to let a second individual access their bank accounts via UPI up to a specific limit.

RBI Hikes UPI Transactions for Tax Payments

In a post on X (formerly known as Twitter), the official handle of RBI announced the new UPI change and said, “UPI has become the most-preferred mode of payments, due to its seamless features. As direct and indirect tax payments are common, regular and high value, it has been decided to enhance the limit for tax payments through UPI from 1 lakh to 5 lakh per transaction.”

The central bank aims to popularise digital payments for tax settlements through this policy change. With a limit of up to Rs. 5,00,000 per transaction, even those with a higher ceiling of tax liabilities will be able to make payments directly via UPI. One significant advantage of opting for UPI over traditional methods such as credit or debit cards is that these transactions incur an additional processing fee, which does not exist in UPI.

Notably, UPI transactions for most use cases is kept at Rs. 1,00,000 per transaction. However, a few categories allow a higher limit. Payments in Capital Markets, Collections, Insurance, and Foreign Inward Remittances have a transaction limit of Rs. 2,00,000, whereas Initial Public Offering (IPO) transactions is allowed up to Rs. 5,00,000. Tax payments have joined the latter category.

In a press conference, RBI Governor Shaktikanta Das said that the decision to increase UPI payment limit was taken in the Monetary Policy Committee (MPC) as direct and indirect tax payments are generally routine, regular, and contain a high value. Detailed instructions regarding this change will be issued separately.

Apart from the UPI limit hike for tax payments, the MPC also introduced a new feature dubbed Delegate Payments. As per RBI, it allows an individual classified as primary user to set a UPI transaction limit for a secondary user on the primary user's bank account.

Put simply, this feature will allow a person to let a family member use their bank account via UPI to make transactions up to a specific limit. This could be beneficial in cases where every individual in the family does not own a bank account.