President Murmu Gives Assent To Tax And Payments Laws, Paves Way For UPI MDR; What Will Change From Now?

President Droupadi Murmu has given her assent to the Taxation and Other Laws (Amendment) Bill, 2026, and the Payment and Settlement Systems Act, 2007. These bills were passed by Parliament on August 10.

Amendments to the Payment and Settlement Systems Act have given the government the legal basis to levy fees on UPI and RuPay card transactions. The government will be able to determine, through notification, which electronic payment methods or transactions will not be subject to the "Merchant Discounted Rate" (MDR) fee.

What Will Change Now?

Currently, banks and payment system providers cannot charge users for payments made using UPI and RuPay debit cards. The UPI and Services Governance Committee, chaired by the National Payments Corporation of India (NPCI), will now decide on MDR charges.

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At the same time, the Taxation and Other Laws (Amendment) Act aims to attract foreign capital, promote domestic electronics manufacturing and facilitate the use of Indian data centres by foreign cloud companies.

The Ordinance Was Brought On June 5

The law replaces an ordinance issued on June 5, 2026, which exempted interest income and capital gains of foreign portfolio investors (FPIs) from income tax on investments in government securities. The Act extends the income tax exemption available to foreign companies for contract manufacturing of electronics products in India, including mobile phones, laptops, personal computers, tablets, servers and their major components and accessories, until the financial year 2040-41.

ALSO READ: UPI Payments To No Longer Be Free? What New Tax Bill Says About Payment Charges, MDR And Foreign Investors

UPI Transactions Remain Free For Consumers: FM Sitharaman

Finance Minister Nirmala Sitharaman, while addressing the Rajya Sabha, said the UPI payments remain free for consumers, and any future merchant charges (MDR) will apply only to certain categories of merchant transactions.

Allaying apprehensions in certain sections that charges may be imposed on UPI transactions, the minister asserted that the vast majority of merchant transactions, including low-value transactions to roadside vendors, will continue to remain free.

She was replying to discussion on The Taxation and Other Laws (Amendment) Bill, 2026, which the Rajya Sabha returned with a voice vote to the Lok Sabha, thus completing the parliamentary process. The minister said the proposed legislation aims to amend Section 10A of the Payment and Settlement Systems Act, 2007.

The amendment is an enabling provision, and it does not impose any tax or transaction charge on UPI users, she added. Sitharaman said the Bill enables the government to specify, through notification, the electronic payment modes that will continue to receive statutory protection against charges.

(With Jagran.com/PTI inputs)