Daily Updates Payments Act Amendment May Open Door for MDR on UPI Transactions Adarsh SinghAugust 4, 2026020 views Proposed Bill Could Give Centre Greater Flexibility on Digital Payment Charges The Taxation and Other Laws (Amendment) Bill, 2026, scheduled to be introduced in Parliament on Tuesday, could give the central government greater flexibility to determine which digital payment methods remain free for merchants and which may attract transaction charges in the future. According to sources, the proposed amendment could replace the existing list of payment instruments referenced under the Income-tax Act, creating a broader framework through which the Centre can decide the charging policy for different digital payment methods. While the Bill does not propose any immediate fees, rates, or implementation timeline, industry observers believe it could lay the groundwork for introducing a Merchant Discount Rate (MDR) on Unified Payments Interface (UPI) transactions in the future. No Immediate Change for UPI Users Despite the speculation, the current prohibition on charging merchants for UPI transactions remains unchanged. The proposed legislation does not prescribe any MDR, nor does it specify when or whether charges will be introduced for any payment instrument. Instead, it would empower the government to determine charging policies through future notifications, if required. 1xBet Branding on FanCode, Zee and Sony LIV Raises Regulatory Questions READ MORE Industry Debate Around Sustainable Growth The proposal has revived discussions around the long-term sustainability of India’s digital payments ecosystem. Commenting on the development, Amrish Rau, CEO of Pine Labs, noted that merchant charges are common across major global real-time payment systems. He pointed out that Brazil’s Pix and China’s real-time payment networks have always operated with merchant charges of around 30–40 basis points (bps). According to Rau, investment in India’s digital payments ecosystem has remained minimal over the past six years due to the absence of MDR, and while UPI continues to grow, the pace of expansion has naturally moderated. He added that significant room still exists to expand digital payment adoption among both consumers and merchants. What It Could Mean If the proposed amendment is eventually followed by changes to the charging framework, it could provide the government with greater policy flexibility regarding digital payment infrastructure. However, any decision on introducing MDR for UPI or other payment methods would require separate government action, as the current Bill neither mandates transaction charges nor announces any implementation schedule. For now, UPI transactions continue to remain free for merchants under the existing regulatory framework.