With the Opposition raising concerns over the possibility of charges on UPI transactions, Finance Minister Nirmala Sitharaman on Thursday clarified that end-users and consumers will not bear any burden.
Parliament on Thursday passed the Taxation and Other Laws (Amendment) Bill, 2026, which, among other changes, amends the Payment and Settlement Systems Act, 2007. The Bill removes the statutory provision mandating a zero Merchant Discount Rate (MDR) on UPI and RuPay debit card transactions since 2020, triggering speculation that free UPI transactions could come to an end.
However, responding to a social media post by Congress leader Jairam Ramesh, Sitharaman clarified that the Merchant Discount Rate (MDR) is levied on merchants, not on end-users or customers.
"It (the levy of a fee) will support banks and fintechs to invest more in infrastructure, innovation and security. All users of UPI will reap the benefits of this investment," the finance minister said.
She also clarified that the UPI Services Steering Committee, headed by the National Payments Corporation of India (NPCI), is yet to take a decision on the MDR framework. The decision will be taken only after the enactment of the Taxation and Other Laws (Amendment) Bill, 2026, which amends Section 10A of the Payment and Settlement Systems Act, 2007.
The clarification came after Jairam Ramesh claimed that the Bill "paves the way for imposing a merchant discount rate (MDR), which could easily be applied in the future to all types of digital payments. The burden of this will ultimately fall on ordinary people, who may now have to pay even for using UPI."
Apart from the changes to the payments law, the Bill introduces significant relaxations for offshore investment funds. It also grants tax exemptions to foreign companies supplying capital goods, equipment and tooling to Indian contract manufacturers in the electronics sector.
Meanwhile, Sitharaman also introduced the Appropriation (No. 3) Bill, 2026 in the Lok Sabha on Thursday. The Rajya Sabha later returned the Bill to the Lok Sabha after consideration. The Bill seeks to authorise the withdrawal and appropriation of additional sums from the Consolidated Fund of India for the services of the financial year 2025-26.