Mandatory Electronic Payment Modes for Businesses (Income Tax Act 2025, Section 187)

Under section 187 of the Income-tax Act, 2025, a person carrying on business or profession must offer prescribed electronic payment modes to customers if total sales, turnover or gross receipts in the immediately preceding tax year exceeded Rs 50 crore. Rule 133 of the Income-tax Rules, 2026 lists the modes. Failing to offer them can attract a penalty of Rs 5,000 for every day of failure under section 452.

This guide covers who is caught, which modes are required, how the test works year to year, and what the penalty looks like in rupees. Every figure comes from the Act (as amended by the Finance Act, 2026) and the Rules. Last reviewed on 10 November 2026.

Who must provide electronic payment facilities under section 187?

Section 187 applies when both conditions are met:

• the person is carrying on business or profession (section 187(a)); and
• total sales, turnover or gross receipts in that business or profession exceed Rs 50 crore in the immediately preceding tax year (section 187(b)).

The section says "every person", so it is not limited to companies. A firm, an LLP, a proprietor or a professional is covered if the turnover test is met. The test is "exceeds", so turnover of exactly Rs 50 crore does not trigger it.

Which electronic payment modes are mandatory?

Rule 133 prescribes four modes. They are required in addition to any other electronic modes the business already offers.

Sl.	Mode required (rule 133)
(i)	Debit Card powered by RuPay
(ii)	Unified Payments Interface (UPI) (BHIM-UPI)
(iii)	UPI Quick Response Code (UPI QR Code) (BHIM-UPI QR Code)
(iv)	Tier-III: Full KYC Central Bank Digital Currency wallets, P-CBDC, Wholesale or Cross-border CBDC

A business that already takes other cards or net banking still has to add whichever of these four it does not offer.

Does the Rs 50 crore test look at this year or last year?

It looks at the preceding tax year. Turnover of tax year 2025-26 decides the obligation for tax year 2026-27.

What is the penalty for not providing the facility?

Section 452 says the Assessing Officer may impose a penalty of Rs 5,000 for every day of the duration of the failure. The penalty is discretionary and runs per day, so the amount grows with the delay.

Days of failure	Maximum penalty at Rs 5,000 a day
10	Rs 50,000
30	Rs 1,50,000
90	Rs 4,50,000
365	Rs 18,25,000

Worked examples

Example 1: does the turnover test apply? (tax year 2026-27)

Assumptions: a trading firm with turnover of Rs 48 crore in 2024-25 and Rs 52.5 crore in 2025-26.

Step	Working	Result
1. Preceding tax year for 2026-27	2025-26	Turnover Rs 52.5 crore
2. Compare with limit	Rs 52.5 crore > Rs 50 crore	Section 187 applies from 2026-27
3. Check the year before (for 2025-26)	Rs 48 crore is not > Rs 50 crore	It did not apply for 2025-26 on this test

Example 2: penalty for a delayed rollout

Assumptions: a manufacturer with preceding-year turnover of Rs 120 crore accepts only cash, cheque and card swipes. It adds UPI, UPI QR, RuPay debit and CBDC acceptance 45 days after the obligation began, and the Assessing Officer imposes the full per-day amount.

1. Days of failure: 45
2. Penalty per day: Rs 5,000
3. Penalty: 45 x Rs 5,000 = Rs 2,25,000

Is there a separate rule on paying business expenses in cash?

Yes, and it is a different obligation from section 187. Section 187 is about what a large seller must accept. Section 36(4) is about how any business must pay: if payments to one person in a day exceed Rs 10,000 and are not made through a specified banking or online mode, that expenditure is not allowed as a deduction. Under section 36(5), an earlier-year liability that was deducted and is later paid above the limit outside those modes is treated as business income in the year of payment. For plying, hiring or leasing goods carriages the limit is Rs 35,000 (section 36(6)). Section 36(7) lets the rules carve out exceptions, with the full list in the disallowance checklist.

Rule 48 lists the other electronic modes: credit card, debit card, net banking, IMPS, UPI, RTGS, NEFT, BHIM Aadhaar Pay and Tier-III full KYC CBDC wallets. The 2025 Act also governs cash on the receiving side, covered in cash transaction limits: section 186 bars receiving Rs 2,00,000 or more in cash in a day, in one transaction or for one event.

Example 3: cash paid to a supplier (tax year 2026-27)

Assumptions: Ravi's firm pays a packaging vendor Rs 8,000 in cash at 11 am and Rs 7,000 in cash at 4 pm on the same day, with no exception applying.

1. Aggregate paid to one person in the day: Rs 8,000 + Rs 7,000 = Rs 15,000
2. Limit: Rs 10,000. Rs 15,000 exceeds it and no specified mode was used.
3. Result: the whole Rs 15,000 is disallowed under section 36(4). Paying by UPI would have kept it deductible.

Real-life examples

Ravi runs a chain of showrooms. His turnover last tax year was Rs 70 crore, and the counters accept only cash and credit cards. He must now add RuPay debit, UPI, UPI QR and CBDC wallet acceptance. Having cards already does not remove the duty, since rule 133 says the four modes are added to whatever he offers.

Meena is a consultant with gross receipts of Rs 3 crore. Her receipts are far below Rs 50 crore, so section 187 does not apply to her, even though she may choose to accept UPI anyway.

Common mistakes

• Testing the current year's turnover instead of the immediately preceding tax year.
• Assuming only companies are covered. The section applies to "every person" carrying on business or profession.
• Offering UPI but not the other three modes in rule 133.
• Treating turnover of exactly Rs 50 crore as covered. The test is "exceeds".
• Confusing section 187 (accepting payments) with section 36(4) (paying expenses): the first has a Rs 50 crore turnover test, the second applies to every business above Rs 10,000 a day to one person.
• Ignoring that the penalty is per day, so each week of delay adds Rs 35,000.

Quick reference

Item	Detail
Applies to	Person carrying on business or profession
Trigger	Turnover above Rs 50 crore in the preceding tax year
Modes	RuPay debit card, UPI, UPI QR, Tier-III full KYC CBDC wallets
Penalty	Rs 5,000 for every day of failure

Where this is in the Act

• Section 187: facility for prescribed electronic payment modes
• Rule 133 (Income-tax Rules, 2026): the prescribed modes
• Section 452: penalty of Rs 5,000 per day
• Section 36(4) to (7): cash payments above Rs 10,000 (Rs 35,000 for goods carriages); rule 48: other electronic modes
• Section 186: receipts of Rs 2,00,000 or more

How can a CA firm keep track of this for clients?

For a CA firm, the practical task is spotting which clients crossed Rs 50 crore last year and following up on whether they have switched the modes on. Finexo's practice management software can hold these as client-wise tasks with reminders. It does not set up payment modes for the client.

This article explains the Income-tax Act, 2025 (as amended by the Finance Act, 2026) and the Income-tax Rules, 2026. It is general information, not tax advice. Confirm the position for a specific case with a qualified chartered accountant.