New Delhi, August 8, 2026: The Lok Sabha has passed the Taxation and Other Laws (Amendment) Bill, 2026, which could pave the way for charges on UPI and other electronic payment methods in the future.
The Bill was passed by voice vote without discussion amid disruptions in the House. Finance Minister Nirmala Sitharaman moved the legislation for consideration after the Lok Sabha resumed proceedings at 2 p.m.
The key amendment relates to Section 10A of the Payment and Settlement Systems Act, 2007. Under the amended provision, the Central Government will have the power to specify through notification which electronic payment systems can be subject to charges.
However, the amendment does not immediately impose any charge on UPI transactions. At present, UPI remains free for customers and merchants. The government has not announced any specific charge, transaction limit or date for introducing such a fee.
The development comes amid discussions over the possible introduction of a Merchant Discount Rate (MDR) on UPI transactions. RBI Governor Sanjay Malhotra has said it is too early to discuss the exact details of an MDR, while noting that maintaining the country’s digital payment infrastructure involves significant costs.
According to Malhotra, these costs could either be met through taxes paid by the public or recovered directly from users or merchants through an MDR under a “user pays” model.
Banks and payment companies have been seeking ways to recover the costs associated with operating the UPI ecosystem. However, the government has so far kept UPI transactions free to encourage the wider adoption of digital payments.
Industry experts have suggested that if an MDR is introduced, it could potentially apply only to certain high-value merchant transactions, while person-to-person UPI payments could remain free. However, there is currently no official decision on such a structure.
For now, the Bill only creates a legal framework that allows the government to introduce charges on selected digital payment methods. Any decision on whether UPI will attract a fee, the amount involved and the transactions covered will be taken later through a government notification.
