New Delhi, Aug 2026 : Parliament on Monday approved the Taxation and Other Laws (Amendment) Bill, with Finance Minister Nirmala Sitharaman making it clear that the legislation does not impose any tax or transaction fee on people using the Unified Payments Interface (UPI).
The Bill, which had already been passed by the Lok Sabha last week, was taken up by the Rajya Sabha on Monday. Following a brief discussion and the Finance Minister’s response, the Upper House approved the legislation through a voice vote, completing the parliamentary process.
Addressing the Rajya Sabha, Sitharaman clarified concerns surrounding the proposed amendment to Section 10A of the Payment and Settlement Systems Act. She said the provision was only an enabling measure and did not introduce a Merchant Discount Rate (MDR) or any other transaction charge on UPI users.
“The enabling provision we are bringing in does not impose any tax or transaction charge on UPI users,” Sitharaman said.
The Finance Minister further explained that the decision on whether an MDR framework should eventually be introduced would be taken by the UPI and Services Steering Committee of the National Payments Corporation of India (NPCI), following Parliament’s approval.
She stressed that no MDR framework had been finalised so far, seeking to dispel speculation that users would immediately have to pay charges for making UPI transactions.
The clarification assumes significance as concerns had emerged over the possibility of transaction fees being imposed on UPI payments following the proposed amendments. The Finance Ministry had also issued a clarification on Saturday, stating that person-to-person UPI transactions would continue to remain free under the proposed framework.
According to the government, even if MDR is introduced in the future, it would be applicable only to a limited category of merchant transactions crossing a specified threshold. The charge, if imposed, would be nominal and substantially lower than the MDR generally associated with debit and credit card transactions.
The government has also maintained that the overwhelming majority of everyday UPI transactions would continue to remain free for merchants. Officials said more than 90 per cent of transactions, including routine purchases such as milk, vegetables and groceries, would not attract an MDR charge.
The proposed mechanism, therefore, would be threshold-based rather than a blanket fee imposed on every UPI transaction. The government has sought to distinguish the proposed enabling provision from an immediate decision to levy charges on users.
UPI, launched in 2016, has transformed India's digital payments ecosystem by enabling instant and interoperable bank-to-bank transactions. Since January 2020, UPI transactions have remained free for both consumers and merchants under the prevailing framework.
The government highlighted the growth of UPI as one of India's major digital achievements, describing it as the world's largest real-time interoperable payment system.
Sitharaman's clarification is expected to reassure millions of consumers and businesses that routine UPI payments will not suddenly become chargeable following the passage of the Bill. The government has reiterated that any future decision relating to MDR would involve a separate consideration and would not amount to imposing a universal transaction fee on UPI users.
The legislation's passage comes as India continues to expand its digital payments infrastructure and promote UPI as a key component of the country's cashless economy.
