diff --git a/erpnext/accounts/doctype/sales_invoice/test_sales_invoice.py b/erpnext/accounts/doctype/sales_invoice/test_sales_invoice.py
index 0a5172eaba6..2df095a41a0 100644
--- a/erpnext/accounts/doctype/sales_invoice/test_sales_invoice.py
+++ b/erpnext/accounts/doctype/sales_invoice/test_sales_invoice.py
@@ -2712,6 +2712,19 @@ class TestSalesInvoice(unittest.TestCase):
 		self.assertEqual(einvoice["ItemList"][2]["UnitPrice"], 20)
 		self.assertEqual(einvoice["ItemList"][3]["UnitPrice"], 10)
 
+		si = get_sales_invoice_for_e_invoice()
+		si.apply_discount_on = ""
+		si.items[1].price_list_rate = 15
+		si.items[1].discount_amount = -5
+		si.items[1].rate = 20
+		si.save()
+
+		einvoice = make_einvoice(si)
+		validate_totals(einvoice)
+
+		self.assertEqual(einvoice["ItemList"][1]["Discount"], 0)
+		self.assertEqual(einvoice["ItemList"][1]["UnitPrice"], 20)
+
 	def test_einvoice_without_discounts(self):
 		from erpnext.regional.india.e_invoice.utils import make_einvoice, validate_totals
 
@@ -2804,6 +2817,19 @@ class TestSalesInvoice(unittest.TestCase):
 		self.assertEqual(einvoice["ItemList"][2]["UnitPrice"], 18)
 		self.assertEqual(einvoice["ItemList"][3]["UnitPrice"], 5)
 
+		si = get_sales_invoice_for_e_invoice()
+		si.apply_discount_on = ""
+		si.items[1].price_list_rate = 15
+		si.items[1].discount_amount = -5
+		si.items[1].rate = 20
+		si.save()
+
+		einvoice = make_einvoice(si)
+		validate_totals(einvoice)
+
+		self.assertEqual(einvoice["ItemList"][1]["Discount"], 0)
+		self.assertEqual(einvoice["ItemList"][1]["UnitPrice"], 20)
+
 	def test_item_tax_net_range(self):
 		item = create_item("T Shirt")
 
diff --git a/erpnext/regional/india/e_invoice/utils.py b/erpnext/regional/india/e_invoice/utils.py
index bf304bc10dc..9292fc1cfec 100644
--- a/erpnext/regional/india/e_invoice/utils.py
+++ b/erpnext/regional/india/e_invoice/utils.py
@@ -265,6 +265,10 @@ def get_overseas_address_details(address_name):
 def get_item_list(invoice):
 	item_list = []
 
+	hide_discount_in_einvoice = cint(
+		frappe.db.get_single_value("E Invoice Settings", "dont_show_discounts_in_e_invoice")
+	)
+
 	for d in invoice.items:
 		einvoice_item_schema = read_json("einv_item_template")
 		item = frappe._dict({})
@@ -276,17 +280,12 @@ def get_item_list(invoice):
 		item.qty = abs(item.qty)
 		item_qty = item.qty
 
-		item.discount_amount = abs(item.discount_amount)
 		item.taxable_value = abs(item.taxable_value)
 
 		if invoice.get("is_return") or invoice.get("is_debit_note"):
 			item_qty = item_qty or 1
 
-		hide_discount_in_einvoice = cint(
-			frappe.db.get_single_value("E Invoice Settings", "dont_show_discounts_in_e_invoice")
-		)
-
-		if hide_discount_in_einvoice:
+		if hide_discount_in_einvoice or invoice.is_internal_customer or item.discount_amount < 0:
 			item.unit_rate = item.taxable_value / item_qty
 			item.gross_amount = item.taxable_value
 			item.discount_amount = 0