The Lok Sabha has passed a Bill that gives the Central Government the legal authority to permit charges on certain digital payment modes, including UPI, through future notifications. The legislation does not introduce any immediate fee on UPI transactions but creates a framework that allows such charges if approved later.
The government has also clarified that there is currently no proposal to charge individual users, making the amendment an important policy development for India’s digital payments ecosystem.
Lok Sabha Passes Bill Enabling Future Charges on UPI Transactions
The Lok Sabha has passed the Taxation and Other Laws (Amendment) Bill, 2026, which includes important changes to the Payment and Settlement Systems Act, 2007. The amendment gives the Central Government the legal authority to permit banks and payment service providers to levy charges on specified electronic payment methods, including UPI, if it decides to do so in the future. However, the Bill does not immediately impose any fee on UPI users.
What Has Changed?
Until now, Section 10A of the Payment and Settlement Systems Act prevented banks and payment system operators from charging fees on certain notified electronic payment modes.
The newly approved amendment replaces this restriction with a provision allowing the Central Government to notify one or more electronic payment modes on which charges may be permitted. This gives the government greater flexibility to determine the future fee structure for digital payments.
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Does This Mean UPI Will Become Chargeable?
No. The legislation does not introduce charges immediately.
Instead, it creates a legal framework that allows the government to authorize such charges through future notifications. Until any notification is issued, UPI payments will continue to function under the existing system.
Why Was the Amendment Introduced?
According to the government, the amendment aims to modernize the legal framework governing India’s rapidly growing digital payments ecosystem.
Supporters of the move argue that payment infrastructure requires continuous investment in:
- Technology upgrades
- Cybersecurity
- Fraud prevention
- Payment processing infrastructure
- Innovation in digital payment services
Allowing the government to approve transaction charges in the future could provide banks and payment service providers with an additional revenue source to support these investments.
Merchant Discount Rate (MDR) Could Return
Industry experts believe the amendment could pave the way for the return of the Merchant Discount Rate (MDR) on UPI transactions.
MDR is a fee paid by merchants to banks or payment service providers whenever customers make digital payments. While UPI transactions have remained free of MDR in recent years to encourage digital adoption, the amended law removes the legal barrier that prevented the government from allowing such charges in the future.
Will Customers Have to Pay?
Following public concerns, Finance Minister Nirmala Sitharaman clarified that any future MDR would apply to merchants rather than individual customers. She stated that there is no proposal to charge ordinary users for making UPI payments.
Why Is This Significant?
UPI has become India’s most widely used digital payment platform, handling billions of transactions every month. Since its launch, the government has promoted zero-cost digital payments to encourage adoption among consumers and businesses.
The new amendment represents a policy shift by giving the government flexibility to revisit the pricing model as the digital payments ecosystem matures. While no charges have been announced yet, the law ensures that such a decision can be implemented legally if required in the future.
What Happens Next?
The Bill has been passed by the Lok Sabha, but any actual charges on UPI or other electronic payment modes would require:
- The law to complete the remaining legislative process.
- The Central Government to issue an official notification specifying the payment modes and applicable charges.
- Implementation guidelines for banks and payment service providers.
Until these steps are completed, UPI transactions remain unchanged for users.
Conclusion
The amendment passed by the Lok Sabha does not make UPI transactions chargeable immediately. Instead, it gives the Central Government the legal authority to permit charges on specified digital payment modes in the future. The government has also clarified that, if introduced, Merchant Discount Rate (MDR) would be intended for merchants rather than customers. The development marks an important legislative change that could shape the future economics of India’s digital payment ecosystem.