Know the difference between NEFT and UPI charges, benefits, payment limit, etc.
The emerging technology in the banking sector has made various day-to-day tasks simpler than before. Making payments to peers and merchants is one such task. Gone are the days when cash and cheques were the only means of financial transactions. Today, you can make payments digitally using your smartphone. Among the various digital payment methods, the two popular ones include Unified Payments Interface (UPI) and the National Electronic Funds Transfer (NEFT) facility. Both payment methods facilitate convenient payments and save time, but they are distinct from each other in various ways. In this article, we have explained the meanings and compared NEFT vs UPI.
Short for United Payments Interface, UPI is a real-time digital payment solution. The National Payments Corporation of India (NPCI) introduced UPI in 2016 to promote the ‘Digital India’ campaign. You can use UPI to make real-time payments to peers and merchants.
To use UPI, you must link your bank account to a UPI-enabled app by entering your Debit Card details or opting for Aadhaar-based verification. After completing the one-time setup, you can initiate payments through your Virtual Payment Address (VPA). Other ways to make payments include using the recipient’s UPI-registered mobile number, or QR code.
Introduced in 2005 by the Reserve Bank of India (RBI), NEFT is a nationwide online funds transfer system. Using NEFT, you can make payments from one NEFT-enabled bank to another. The payments initiated through NEFT are settled in batches. Unlike earlier, there are no fixed timeslots for such settlements. You can use the NEFT service round the clock. The bank clears the NEFT transactions in half-hourly batches throughout the day. To initiate an NEFT transaction, you must provide details like the name, bank account number, bank name, bank branch, and Indian Financial System Code (IFSC) of the beneficiary.
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UPI differs from NEFT in many ways. The general differentiating factors include the following.
A UPI-enabled app is a primary medium used for conducting UPI transactions. You can download various UPI-enabled apps. Both, the sender and the receiver must have the app downloaded on their smartphone to conduct a UPI transaction. As for NEFT payments, you can initiate the transaction through Mobile Banking, Internet Banking, or by physically visiting the bank.
UPI transactions are processed instantly. The funds you transfer reflect immediately in the account of the recipient, with no waiting time. On the other hand, NEFT transactions are processed in half-hourly batches. The transferred funds typically reflect within one-two hours in the beneficiary account.
The RBI does not impose any limit on the amount you can remit through NEFT. However, banks may set a limit on the maximum transaction amount. For UPI transactions, the limit varies based on the payment category. For regular payments, the maximum limit is up to INR 1 lakh. Specific categories like foreign inward remittances, insurance, capital markets, etc., have an upper limit of INR 2 lakhs. Additionally you can transfer up to INR 5 lakhs with UPI payments for Retail Direct Schemes and IPO applications.
RBI has not proposed any instructions regarding UPI transaction charges. Currently, UPI payments come under the zero-charge framework. As for NEFT, you incur zero charges for transactions initiated through Net Banking or Mobile Banking apps as per RBI guidelines. However, banks can levy charges for outward remittances conducted at the bank branch.
The charges are nominal and can be classified as follows:
UPI and NEFT offer unique benefits that make them stand out individually. Here are some of them:
Comparing NEFT vs UPI enables you to make a clear judgement while choosing a digital payment method based on your preferred transaction type. As discussed, both payment systems have their set of unique features and benefits. UPI is more suitable for small-scale, instant transactions.
Conversely, NEFT is ideal for transferring substantial amounts of money when you have the bank details of the recipient. You can use both the payment systems online by using the funds in your Savings Account.
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*Disclaimer: This article is for information purposes only. We recommend you get in touch with your income tax advisor or CA for expert advice.