With the rise of UPI, there has been a big bounce in India's digital journey. It has made it easier to transfer money than ever. Whether it is distributing bills, buying groceries or transfer to the family, UPI allows users to complete transactions in seconds using only a smartphone. It eliminates the need for cash or card, provides safe and detection payment and does not charge any hidden fee.

Learn tax rules for UPI transaction

The Income Tax Department also keeps an eye on UPI transactions as other income forms. If you get a gift from a person through UPI who is not your relative and the total amount is more than Rs 50,000 in a financial year, then it will be considered as “income from other sources” and will be taxed accordingly. However, the gifts received from relatives-no matter how much the zodiac-are completely tax-free.

If your employer sends you a gift or voucher of more than Rs 5,000 in a year through UPI, then that amount will be added to your salary and your income will be tax according to the slab. The cashback received through UPI can also be taxable, if the total cashback in a year is more than Rs 50,000.

Traders should keep in mind that any reward or encouragement through UPI is counted as income and is taxed. Also, a large UPI transaction of more than 1 lakh rupees can be checked and if they are considered income, then they may be taxed. However, there is a relaxation limit of up to Rs 5 lakh on payment made for IPO, insurance premium or tax.

The UPI fund received as a loan repair or references does not tax, but if you earn interest on the loan given to someone, then that interest is taxed.

No additional fee for using UPI
The biggest advantage of using UPI is that it does not charge any additional fee. You can send or receive money without worrying about hidden charges. To start you just need an UPI ID or PIN, which makes the transaction quick and easy – every time you do not need to enter your details while paying.