Parliament clears taxation bill: FM Sitharaman says UPI will remain free; no framework on MDR yet
Parliament clears the Taxation Bill as Nirmala Sitharaman says UPI payments will remain free for consumers. No MDR framework has been finalised yet.
The Taxation and Other Laws (Amendment) Bill, 2026 was passed by India's Parliament on 10 August, 2026. Union Finance Minister Nirmala Sitharaman assured on Monday that UPI payments will continue to be free for consumers, with no tax or transaction charge imposed by the legislation. While the Bill allows the government to specify electronic payment systems that should remain protected from charges, no decision on introducing Merchant Discount Rate (MDR) has been taken yet.
The legislation introduces changes to Section 10A of the Payment and Settlement Systems Act, 2007, giving the government the power to define which electronic payment modes will continue to be protected from transaction fees. Currently, UPI and RuPay debit card transactions are processed under a zero-MDR framework, with banks and payment system providers not charged by merchants.
The government's move to introduce this legal framework is aimed at promoting digital payments and attracting foreign investment. However, any potential introduction of MDR would require further consideration by the UPI and Services Steering Committee.
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