Just the mere thought of imposing charges on UPI transactions gave users a nightmarish experience, so much so that Finance Minister Nirmala Sitharaman had to clarify the government’s position. Now, in the latest development, President Droupadi Murmu has given her assent to the Taxation and Other Laws (Amendment) Act, 2026, and the law related to amendments to the Payment and Settlement Systems Act, 2007.
When were the bills passed?
Parliament had passed both bills on August 10. Now with the changes to the payment law give the government a legal framework to decide how charges can be applied to digital payment transactions. However, there is still no clarity on whether users will have to pay anything for UPI payments, as the government has maintained that UPI will remain free for users. So far, the government has assured users that regular users will not suffer because of the move. However, this has left people curious about what the changes could mean for them.
What does the payment law change?
Amendments to the Payment and Settlement Systems Act give the government the power to notify which electronic payment modes or transactions will be exempt from Merchant Discount Rate (MDR) charges. MDR is a fee linked to digital payments and is generally paid by merchants or businesses. At present, banks and payment system providers cannot charge users for payments made through UPI or RuPay debit cards. A UPI and service operations committee chaired by NPCI will now have a role in decisions related to MDR.
Will UPI payments become chargeable?
Finance Minister Nirmala Sitharaman had said during the discussion on the bill that UPI payments would remain free for users. She also clarified that MDR charges in future would apply only to certain categories of business transactions. This means ordinary users are not being asked to pay a UPI transaction fee under the changes approved by Parliament.
Why was the taxation law amended?
By makings amends to this government targets to boost domestic manufacturing. Taxation and Other Laws (Amendment) Act, 2026 aims to attract foreign capital and support domestic electronics manufacturing. It also seeks to make it easier for foreign cloud companies to use data centres in India. Law replaces an ordinance issued on June 5, 2026. That ordinance had provided income tax exemptions on interest income and capital gains earned by foreign portfolio investors from investments in government securities.
What does the law mean for electronics makers?
Tax benefits available to foreign companies for contract manufacturing of electronics products in India have been extended until financial year 2040-41. Covered products include mobile phones, laptops, personal computers, tablets and servers. Major components and accessories used in these products are also included. Move is aimed at encouraging more electronics production in India and attracting global companies to set up or expand manufacturing operations in the country.
What experts are saying?
According to experts, although the government has clarified that retail transactions by common users will not be charged, this is highly unlikely that they won’t be affected. If merchants are made to pay for UPI transactions, there is a high chance that they will pass on the additional cost to consumers. Experts believe this could eventually lead to higher inflation and encourage people to shift back to cash transactions.
