Parliament cleared the Taxation and Other Laws (Amendment) Bill 2026 on 10 August, after a voice vote in the Rajya Sabha. Finance Minister Nirmala Sitharaman clarified that UPI transactions will remain free for consumers, with no immediate charges introduced. She stressed that the government has not imposed any tax or fee on UPI payments, ensuring continued affordability of India’s most popular digital payment system.
The Bill amends Section 10A of the Payment and Settlement Systems Act, 2007, giving the government power to specify which electronic payment systems remain protected from charges. This legal framework allows flexibility for future changes but does not itself introduce MDR. Currently, UPI and RuPay debit card transactions operate under a zero-MDR regime, meaning neither consumers nor merchants pay fees.
The government’s clarification comes amid debate on how India’s fast-growing digital payments ecosystem should be financed. MDR, or Merchant Discount Rate, is a fee usually paid by merchants to cover transaction processing. For UPI, the government has maintained zero-MDR to encourage adoption, while banks and payment providers receive support through incentives.
The Bill also includes measures to attract foreign investment, support electronics manufacturing, and provide tax exemptions for foreign portfolio investors. For now, UPI remains free for consumers and small merchants, with any MDR decision left to the National Payments Corporation of India and the UPI Steering Committee. This ensures digital payments stay inclusive and cost-effective while preparing for future sustainability