Benami Act Section 23 Used to Probe UPI Payment Gateways
Why in the news
Tax officials used the Benami law to question payment gateway firms about suspicious UPI merchants who may be fronts for hidden beneficiaries.
Key facts
- Information sought: persons behind suspicious UPI IDs, payees, dates, bank details and the actual money trail.
- Suspected pattern: a merchant gets a UPI payment and returns cash, helping the payer book fake expenses.
- Test: does the recipient report that income? If not, a benami arrangement is suspected.
| Law | Information gathering |
|---|---|
| Benami Act, Section 23 | Possible without an ongoing probe |
| Income-tax Act | Usually tied to a pending assessment |
About payment gateways
A payment gateway is the technology merchants use to accept card payments in shops and online, and it now also handles QR and NFC phone payments. Gateways are RBI-regulated and must do KYC before onboarding merchants; they may need to explain if real operators differ from KYC names.
Exam angle
- Act invoked: Benami Transactions (Prohibition) Act, 1988.
- Gateway regulator: RBI.
- Fintechs may tighten transaction monitoring and onboarding.