The Lok Sabha on Thursday passed the Taxation and Other Laws (Amendment) Bill, 2026, paving the way for the Centre to notify charges on Unified Payments Interface (UPI), RuPay debit cards and other electronic payment modes in the future. While the legislation does not introduce any immediate fee on digital transactions, it removes the legal restriction that currently prevents banks and payment service providers from levying Merchant Discount Rate (MDR) on notified payment systems. The Bill was passed by voice vote amid protests by Opposition members and replaces the ordinance promulgated on June 5.
Will UPI Users Have To Pay Charges Immediately?
No. The Bill does not impose any UPI transaction fee or Merchant Discount Rate (MDR) with immediate effect. Instead, it gives the Central government the legal authority to decide, through future notifications, whether charges should apply to specific electronic payment modes or categories of transactions. Until such a notification is issued, the existing zero-charge framework for UPI remains unchanged.
What Changes Has The Lok Sabha-Approved Bill Made?
The legislation amends the Payment and Settlement Systems Act, 2007, removing the provision that bars banks and payment service providers from charging MDR on notified digital payment modes. It also amends the Income Tax Act, 2025, and the Finance Act, 2026, as part of a broader package of tax and financial sector reforms aimed at boosting investment, manufacturing and digital infrastructure.
What Is Merchant Discount Rate (MDR)?
Merchant Discount Rate (MDR) is a fee paid by merchants to banks and payment service providers for processing digital transactions. While payment systems such as RTGS and NEFT already involve service charges, UPI and RuPay debit card transactions have operated under a zero MDR policy, meaning neither merchants nor customers have been charged MDR for eligible transactions. The new Bill creates the legal basis for the government to revise this framework in the future.
Why Does The Government Want To Allow UPI Charges?
According to the government, the amendment aims to create a sustainable revenue model for banks, payment service providers (PSPs) and companies that operate India’s digital payment infrastructure. Officials believe the move will help strengthen the long term growth of the digital payments ecosystem while ensuring adequate investment in payment technology and infrastructure.
What Other Major Changes Does The Bill Introduce?
Apart from digital payments, the Bill includes several tax and investment related reforms. It proposes easier rules for foreign fund managers relocating operations to India by reducing conditions that determine whether their global income becomes taxable in the country. The government expects the measure to attract global investment firms and create high value jobs. The legislation also preserves the tax-free dividend status for investors in Real Estate Investment Trusts (REITs) and Infrastructure Investment Trusts (InvITs) even if operating companies shift to the new income tax regime.
