Lok Sabha Passes Bill Enabling Government To Allow Charges on UPI and Other Digital Payments
The Lok Sabha on Thursday passed a bill to amend the Payment and Settlement Systems Act, 2007, empowering the Central Government to permit banks and payment service providers to levy charges on Unified Payments Interface (UPI) transactions and other notified digital payment channels.
The Lok Sabha on Thursday passed the Taxation and Other Laws (Amendment) Bill, 2026, clearing the way for the Central government to authorise banks and payment service providers to levy charges on Unified Payments Interface (UPI) transactions and other notified digital payment modes in the future. While the legislation creates the legal framework for such charges, it does not immediately impose fees on UPI transactions, according to a report.
Bill Amends Payment and Settlement Systems Act
The legislation amends the Payment and Settlement Systems (PSS) Act, 2007, removing the existing legal restriction that prevented the government from allowing Merchant Discount Rate (MDR) or similar charges on notified digital payment methods. The amendment empowers the Centre to notify charges through future rules if it decides to do so. Any implementation, including the rate, scope and applicability of such charges, will require a separate government notification. Lok Sabha Passes Bankers' Books Evidence Bill 2026 to Recognise Digital Banking Records as Legal Evidence.
Lok Sabha Passes Taxation and Other Laws (Amendment) Bill 2026
No Immediate Charges on UPI
The passage of the Bill does not mean UPI users will begin paying transaction fees immediately. The government has not announced when or whether charges will be introduced, or which categories of transactions may be affected.
Industry discussions have largely centred on applying MDR to high-value merchant transactions, while person-to-person (P2P) transfers are expected to remain outside the proposed framework. However, the final structure has not yet been decided. Lok Sabha Passes Public Examinations Bill 2026, Brings Tougher Punishment for Paper Leaks.
Why the Government Is Considering the Change
The proposed amendment comes amid growing debate over the financial sustainability of India's digital payments ecosystem. Since 2020, UPI transactions have largely remained free for both consumers and merchants, with the government absorbing part of the infrastructure costs.
Banks and payment service providers have argued that the absence of MDR has made it difficult to recover operational expenses as UPI volumes continue to grow. The amendment is intended to provide the legal basis for a future revenue model if the government decides it is necessary.
Broader Tax and Investment Reforms
Besides the digital payments provision, the Bill includes several tax-related amendments aimed at encouraging foreign investment, supporting electronics manufacturing, facilitating data centre development and providing greater tax certainty for investors.
The government has said the broader package is designed to strengthen India's investment climate and support long-term economic growth.
Next Steps
Following its passage in the Lok Sabha, the Bill will require approval from the Rajya Sabha before it can become law. Even after enactment, any decision to introduce charges on UPI or other digital payment modes would require separate notifications specifying the transactions covered, the applicable rates and the entities responsible for paying them.
(The above story first appeared on LatestLY on Aug 06, 2026 06:19 PM IST. For more news and updates on politics, world, sports, entertainment and lifestyle, log on to our website latestly.com).