India Parliament passes bill enabling potential UPI merchant fees

The Indian Parliament has passed the Taxation and Other Laws (Amendment) Bill, 2026, which provides a legal framework for potential Merchant Discount Rate (MDR) charges on certain digital transactions. Finance Minister Nirmala Sitharaman clarified in the Rajya Sabha that the legislation is an enabling provision and does not currently impose any taxes or transaction charges on Unified Payments Interface (UPI) users.

While consumers and small-scale merchants will continue to enjoy free UPI services, the bill allows the government to specify which electronic payment modes will receive statutory protection against charges. Any future MDR framework will be decided by the UPI and Services Steering Committee, headed by the National Payments Corporation of India (NPCI). It is expected that any such fees would apply only to a limited category of high-value merchant transactions above a certain threshold, leaving the vast majority of everyday transactions, such as those for groceries or roadside vendors, free of charge.

The bill also includes broader economic measures, such as tax exemptions for certain foreign institutional investors on government securities and reforms to support domestic data centers and electronics manufacturing.