India
oi-Swastika Sruti
The UPI transactions reached the parliament and the Lok Sabha on Thursday passed the Taxation and Other Laws (Amendment) Bill, 2026, introducing an important change to the Payment and Settlement Systems Act, 2007.
India’s Lok Sabha passed the Taxation and Other Laws (Amendment) Bill, 2026, empowering the government to introduce charges on digital payment modes like UPI via future notifications, replacing restrictions under the Payment and Settlement Systems Act, 2007.
The amendment gives the Central government the power to notify charges on UP and other digital payment modes in the future.
The Bill was passed through a voice vote without discussion amid disruptions in the House, the Bill does not immediately introduce charges on UPI transactions. Instead, it removes the legal restriction that prevented banks and payment service providers from collecting Merchant Discount Rate (MDR) on notified digital payment methods.
What Has Changed?
The amendment replaces the existing provision under Section 10A of the Payment and Settlement Systems Act, 2007.
Earlier, the law barred banks and payment service providers from imposing any direct or indirect charges on specified electronic payment modes covered under the Income Tax Act.
With the amendment, the Centre can now decide, through future notifications, which electronic payment methods may attract charges.
This means the government now has the legal authority to introduce charges if it chooses to do so at a later stage.
Will You Have to Pay for UPI Transactions Now?
No.
The passage of the Bill does not mean UPI transactions will become chargeable immediately.
As of now, UPI payments will continue under the existing framework. Any change will require a separate government notification specifying the payment modes on which charges may be levied.
Until then, users can continue making UPI payments without any change.
The new amendment gives the government greater flexibility to frame future digital payment policies.
What Is Merchant Discount Rate (MDR)?
Merchant Discount Rate, commonly known as MDR, is a fee paid by merchants to banks or payment service providers for processing digital transactions.
Currently:
- Credit card transactions generally attract MDR.
- Some digital payment services also involve processing charges.
- UPI transactions have remained free of MDR, helping them become India’s most widely used digital payment system.
The amendment simply creates the legal framework for the government to allow MDR on notified payment methods if required in the future.
