The Indian Parliament cleared The Taxation and Other Laws (Amendment) Bill, 2026, which could pave the way for introducing a merchant discount rate (MDR) on certain UPI payments. The Rajya Sabha approved the bill via voice vote, sending it back to the Lok Sabha for further consideration. Finance Minister Nirmala Sitharaman reassured that end-customers will not bear any separate charges on UPI transactions, according to inc42.com.
The bill, categorized as a money bill under the Constitution, allows the government to specify electronic payment modes that will retain statutory protection against charges. Sitharaman explained that the amendment to section 10A of the Payment and Settlement Systems Act, 2007, is an enabling provision rather than an immediate imposition of tax or transaction fees. The UPI and Services Steering Committee, led by the National Payments Corporation of India (NPCI), will decide on the scope and structure of any MDR introduction.
This legislation marks a significant step in formalizing the regulatory framework for digital payments in India. While the government has not finalized any MDR framework, the bill's passage aligns with ongoing efforts to balance merchant costs and consumer protections in the rapidly growing UPI ecosystem. The amendment could impact payment service providers and merchants by potentially introducing fees that have been absent in the current UPI model.
Finance Minister Sitharaman confirmed that no MDR framework has been finalized yet. The bill’s passage through Rajya Sabha on August 10, 2026, sets the stage for the Lok Sabha to deliberate further, with the UPI and Services Steering Committee expected to provide recommendations on MDR implementation.