A proposed amendment introduced by Union Finance Minister Nirmala Sitharaman in the Lok Sabha has triggered widespread debate over whether Unified Payments Interface (UPI) transactions could become chargeable in the future.
The Taxation and Other Laws (Amendment) Bill, 2026, tabled during the ongoing Monsoon Session of Parliament, seeks to amend several laws, including the Payment and Settlement Systems Act, 2007.
One of the most discussed changes is the proposed removal of Section 10A, a provision that currently prevents banks and payment system providers from levying charges on notified electronic payment modes such as UPI and RuPay debit cards.
While social media discussions have suggested that UPI users may soon have to pay transaction fees, the Bill does not introduce any immediate charges or Merchant Discount Rate (MDR). Instead, it would give the Centre greater flexibility to decide, through future notifications rather than fresh legislation, which electronic payment modes can continue to enjoy protection from transaction fees.
Legal experts have clarified that ordinary users will not see any immediate change, while businesses and payment ecosystem participants continue to debate how India’s fast-growing digital payments infrastructure should be funded.
What The Bill Changes
The proposed amendment centres on Section 10A of the Payment and Settlement Systems Act, 2007, which was inserted in November 2019 to promote digital payments across the country. The provision states that banks and payment system providers cannot impose any direct or indirect charge on payments made through specified electronic payment modes.
Since UPI and RuPay debit cards were notified under this provision, merchants and consumers have been able to make and receive payments without paying Merchant Discount Rate (MDR), helping accelerate India’s transition towards a cashless economy.
The new Bill proposes removing this statutory safeguard. If Parliament passes the amendment, the government would no longer require another legislative amendment to change the list of payment methods that enjoy zero transaction charges. Instead, such decisions could be taken through executive notifications, providing policymakers with greater flexibility as the payments ecosystem evolves.
The proposal has sparked concern because MDR is a fee generally paid by merchants to banks and payment processors for accepting digital payments, often ranging between 1 and 3 per cent for card-based transactions.
However, experts emphasise that the amendment itself does not impose MDR on UPI. Advocate Binit Agarwal, a UNDP-empanelled expert on law and artificial intelligence, told reporters that the amendment primarily changes the government’s legislative powers rather than introducing a new charging mechanism.
He described the current debate as “a storm in a teacup”, explaining that “substantively, nothing has changed on allowing UPI service providers to charge MDR on transactions. The policy power always was with the government and continues to remain so.” According to him, even if the Bill becomes law, separate policy decisions and government notifications would still be required before any transaction fee could be introduced.
Why The Debate Matters
The discussion goes beyond whether UPI users will have to pay for transactions. It reflects a broader question about the long-term sustainability of India’s digital payments ecosystem, which has become one of the largest in the world.
Developed by the National Payments Corporation of India (NPCI), UPI enables instant bank-to-bank transfers through applications such as BHIM, PhonePe, Google Pay, Paytm and various banking apps. Its ease of use and zero-cost model have transformed everyday transactions, making digital payments common even among small retailers, street vendors and rural businesses.
While consumers have embraced free UPI payments, banks, fintech companies and payment service providers have argued for several years that maintaining such a vast digital infrastructure comes with increasing costs. They point to investments in cybersecurity, fraud prevention, technology upgrades and settlement infrastructure as reasons why a sustainable revenue model may eventually be required.
To support the ecosystem after eliminating MDR, the Centre has introduced an incentive scheme under which, according to the Finance Ministry, approximately ₹8,730 crore was provided to ecosystem participants between FY2021-22 and FY2024-25.
Even so, the government has repeatedly maintained that there is no current proposal to impose transaction charges on UPI users. The Finance Ministry has earlier informed Parliament that UPI transactions remain free and that incentive payments continue to support payment service providers.
The latest amendment has nevertheless generated confusion on social media, where several posts incorrectly claimed that UPI charges had already been approved. Experts have urged people to distinguish between an enabling legal amendment and an actual policy decision.
Even if the Bill becomes law, Parliament’s approval would only create the legal framework for future decisions. Any change in transaction fees would require separate government notifications specifying which payment modes are affected, who would bear the charges and when such rules would come into force.
The Logical Indian’s Perspective
India’s digital payments revolution has become a global example of how technology can improve financial inclusion, simplify daily transactions and empower millions of people, from urban professionals to small shopkeepers and street vendors. Any discussion about introducing charges into this ecosystem therefore deserves careful public scrutiny, transparent policymaking and clear communication from all stakeholders.
While governments must ensure that digital payment infrastructure remains financially sustainable, policy changes should also protect accessibility, affordability and public trust especially for small businesses and ordinary citizens who have embraced digital payments in good faith. Equally important is resisting misinformation that can spread confusion before policies are even finalised. In an era where rumours often travel faster than facts, informed public dialogue becomes essential.
Also read: UP Teacher Suspended After Viral PM Poshan Video Shows Watery Curry, Less Milk to Students
