Tax amendment bill passed in Lok Sabha: What changes for UPI transactions, offshore fund norms
The Lok Sabha on 6 August passed a Bill to amend the Payment and Settlement Systems Act, 2007 that authorises the government to permit banks
The Lok Sabha on 6 August passed a Bill to amend the Payment and Settlement Systems Act, 2007 that authorises the government to permit banks and other service providers to levy charges on payments through unified payments interface (UPI) and other notified electronic payment modes. 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. Real-time payments made through RTGS and NEFT are done by paying a service charge. However, UPI transactions have been exempted from such charges so far. Quick answers to key questions • 5 QUESTIONS 1 What changes does the Taxation and Other Laws Amendment Bill propose for UPI transactions? ⌵ The Bill proposes to remove the legal provisions preventing banks from charging Merchant Discount Rate (MDR) on UPI transactions, potentially allowing for merchant charges on these payments. 2 Why did the government decide to amend the Payment and Settlement Systems Act regarding UPI? ⌵ The amendment aims to create a sustainable revenue model for banks and payment service providers, ensuring the continuity and growth of the digital payments ecosystem in India. 3 How will the new Bill affect the cost of UPI transactions for consumers? ⌵ Currently, UPI transactions remain free for consumers; however, the Bill allows the government to modify this framework in the future, which could introduce charges depending on subsequent policy decisions. 4 Should merchants be concerned about the removal of the zero-MDR framework for UPI? ⌵ Yes, merchants may face increased costs with the possibility of charges being introduced for UPI transactions, which could affect pricing and consumer behavior. 5 What is the relationship between the Payment and Settlement Systems Act, 2007 and the Income Tax Act, 2025 according to the new Bill? ⌵ The Bill proposes to unlink the Payment and Settlement Systems Act from the Income Tax Act, giving the government the legal authority to modify the zero-MDR framework without direct legislative adjustments. The government said the Bill is aimed at making India more attractive and predictable place for global capital, manufacturing and business to come and stay.
The Taxation and other Laws (Amendment) Bill, 2026, replaces the June 5 Ordinance that provided I-T exemption to interest income and capital gains made by FPIs from investments in G-Secs. Through the Bill, the government amended the Payment and Settlement Systems Act, 2007, the Income Tax Act, 2025, and the Finance Act, 2026. Bill passed with voice vote amid din The Bill was passed through voice vote in the Lok Sabha after the House resumed at 2 pm after the earlier adjournment on Thursday. As soon as the House re-assembled, Finance Minister Nirmala Sitharaman moved the Taxation and Other Laws (Amendment) Bill, 2026 further to amend the Payment and Settlement Systems Act, 2007 and the Income Tax Act, 2025, and to amend the Finance Act, 2026, to be taken into consideration. Sitharaman had tabled the Bill in Lok Sabha on 4 August. Also Read | FM Nirmala Sitharaman hits back at Jairam Ramesh over UPI taxation The government's approach aims to levy small charge on digital payment services for consumers and small businesses while ensuring a sustainable revenue model for banks, payment service providers (PSPs), and payment infrastructure firms that drive the digital payments ecosystem, news agency PTI said Here are the salient features of the Bill Merchant Charges for UPI, Rupay Card Payments The Bill proposes to remove the linkage between the Payment and Settlement Systems Act and the Income Tax Act, and give a legal backing to the government to modify the zero-MDR framework on UPI and RuPay card transactions, news agency PTI said. The move could allow merchant charges on selected Unified Payments Interface (UPI) transactions, marking a possible shift from India's zero-charge digital-payment regime. At present, banks and payment-system providers cannot directly or indirectly charge users for payment made through UPI and RuPay debit cards. The Bill proposes allowing the central government to decide, through notification, which electronic payment modes or transactions would remain free. While the Bill itself neither introduces a merchant discount rate (MDR) nor specifies a fee, it creates the legal backing for the government to modify the zero-MDR framework later.
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