Parliament has passed the Taxation and Other Laws (Amendment) Bill, 2026, paving the way for the Centre to permit banks and payment service providers to levy charges, including Merchant Discount Rate (MDR), on Unified Payments Interface (UPI) and other notified digital payment transactions. The legislation amends the Payment and Settlement Systems Act, removing the legal restriction that prevented such charges.
The government, however, clarified that the Bill does not automatically impose charges on UPI payments. Finance Minister Nirmala Sitharaman said any future decision on MDR would primarily affect merchants and not ordinary consumers, seeking to allay concerns over free digital transactions.
The move is aimed at providing policy flexibility to strengthen India’s digital payments ecosystem while ensuring its long-term financial sustainability. Any decision on introducing MDR will require a separate government notification.