Tax amendment bill passed in Lok Sabha: What changes for UPI transactions, offshore fund norms
The amendment passed by the House without discussion amid protest by Opposition seeks to remove the existing legal provision that prevents banks and payment service providers from charging Merchant Discount Rate (MDR) on notified electronic payment modes.
On August 6, the Lok Sabha approved a bill to amend the Payment and Settlement Systems Act, 2007, which will permit banks and service providers to charge for UPI transactions and other electronic payment methods. This change comes after the opposition objected to the existing legal provision that barred such charges. Real-time payments through RTGS and NEFT incur service charges, but UPI transactions have been exempted until now.
The bill aims to establish a sustainable revenue model for banks and payment service providers, potentially introducing merchant charges on UPI transactions in the future, which could impact pricing and consumer behavior. The bill also separates the Payment and Settlement Systems Act from the Income Tax Act, giving the government the ability to modify the zero-MDR framework for UPI and RuPay card transactions without direct legislative changes.
This move could result in merchants having to pay fees for selected UPI transactions, affecting pricing and consumer behavior. Additionally, the bill proposes making India more attractive to global capital, manufacturing, and businesses. It also extends tax exemption on interest income and capital gains for foreign portfolio investors (FPIs) investing in government securities for another 10 years, until 2040.
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