Amendment to Taxation Act, Payment and Settlement Systems Act get President’s assent

President Droupadi Murmu has granted her approval to two significant bills: the Taxation and Other Laws (Amendment) Act, 2026, and the Payment and Settlement Systems Act, 2007 Amendment. These bills were approved by Parliament on August 10, 2026. The Taxation and Other Laws (Amendment) Act, 2026, aims to attract more foreign capital, promote electronics manufacturing in India, and facilitate foreign cloud companies in utilizing Indian data centers.

Meanwhile, the Payment and Settlement Systems Act, 2007 Amendment grants the government the authority to modify the zero-MDR framework for UPI and RuPay card transactions, allowing it to decide which electronic payment modes or transactions will be exempt from MDR charges. Presently, banks and payment-system providers are prohibited from charging users for payments made through UPI and RuPay debit cards.

The UPI and Services Steering Committee, chaired by NPCI, will now determine the MDR charges in future. The Finance Minister, Nirmala Sitharaman, assured during the bill's discussion that UPI payments will remain free for consumers, with any subsequent MDR applying only to specific merchant transaction categories. The Taxation and Other Laws (Amendment) Act, 2026, supersedes the June 5 ordinance that provided income tax exemption to interest income and capital gains made by Foreign Portfolio Investors (FPIs) from investments in Government Securities (G-Secs).

This amendment simplifies the process for fund managers to relocate to India by reducing the conditions they must fulfill to prevent their global income from being taxed in India. The Act also extends the income tax exemption for foreign companies engaging contract manufacturers in India for electronics manufacturing until 2040-41.

Furthermore, it offers income tax exemption for 15 years, up to 2040-41, for foreign companies storing components in customs warehouses to supply them to contract manufacturers in India, thereby supporting component supply for electronics factories.