Will UPI Transactions Become Chargeable? What the New Lok Sabha-Passed Bill Means

The Lok Sabha has passed the Taxation and Other Laws (Amendment) Bill, 2026, giving the Central government the authority to notify charges on Unified Payments Interface (UPI), RuPay debit cards, and other electronic payment methods in the future.

However, the legislation does not introduce any immediate charges on UPI transactions. Instead, it removes the existing legal restriction that prevents banks and payment service providers from levying a Merchant Discount Rate (MDR) on notified digital payment systems.

The Bill was passed by voice vote in the Lok Sabha amid protests by Opposition members and replaces the ordinance promulgated on June 5.

Will UPI Users Have to Pay Charges Now?

No. UPI transactions will not become chargeable immediately.

The Bill does not currently impose a transaction fee or MDR on UPI payments. It only gives the Central government the legal authority to decide, through future notifications, whether charges should apply to specific electronic payment methods or categories of transactions.

Until such a notification is issued, the existing zero-charge framework for UPI will remain unchanged.

What Has Changed Under the New Bill?

The legislation amends the Payment and Settlement Systems Act, 2007, removing the provision that prohibits banks and payment service providers from charging MDR on notified digital payment methods.

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, commonly known as 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. This means MDR has not been charged on eligible transactions.

The new Bill creates the legal framework that would allow the government to revise this arrangement in the future.

Why Could UPI Charges Be Introduced?

According to the government, the amendment is intended to create a sustainable revenue model for banks, payment service providers (PSPs), and companies operating India`s digital payment infrastructure.

Officials believe the move could support the long-term growth of India`s digital payments ecosystem while ensuring adequate investment in payment technology and infrastructure.

What Other Changes Does the Bill Introduce?e?

Apart from digital payments, the Bill includes several tax and investment-related reforms.

It proposes easier rules for foreign fund managers relocating their operations to India by reducing certain 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.

Key Takeaway for UPI Users

For UPI users, the key takeaway is that there is no immediate transaction charge. The Bill only creates the legal framework for the government to introduce or notify such charges in the future.