UPI Will Remain Free for Consumers, FM Sitharaman Clarifies as Parliament Passes Tax Bill

Moneylife Digital Team 11 August 2026

Economy & Nation

The Parliament on Monday cleared the Taxation and Other Laws (Amendment) Bill, 2026, with Union minister of finance Nirmala Sitharaman assuring the Rajya Sabha that the legislation does not impose any tax or transaction charge on consumers using the unified payments interface (UPI).

The Bill, which had already been passed by the Lok Sabha, was returned by the Rajya Sabha after a brief discussion and the finance minister's response. As a Money Bill, the Rajya Sabha can only make recommendations which are then considered by the Lok Sabha.

Addressing concerns over a possible UPI transaction fee, Ms Sitharaman said the amendment to Section 10A of the Payment and Settlement Systems Act is merely an enabling provision. It does not, by itself, introduce a merchant discount rate (MDR) or any other charge on UPI users.

"The enabling provision we are bringing in does not impose any tax or transaction charge on UPI users," Ms Sitharaman said.

No, consumers will not have to pay any charges on UPI transactions.

UPI has remained free for consumers since its launch, and every Indian will continue to make instant digital payments without paying a transaction charge.

- Smt @nsitharaman in Rajya Sabha (1/n) pic.twitter.com/UP7fEleT38
— Nirmala Sitharaman Office (@nsitharamanoffc) August 10, 2026

The finance minister said the decision on whether an MDR framework should eventually be introduced would be considered by the UPI and services steering committee of the National Payments Corporation of India (NPCI).

She made it clear that no such framework has been finalised. "So, no MDR framework has been finalised," she said.

No Charge on Person-to-person UPI Payments

The government's clarification comes amid speculation that the proposed amendment could result in charges being levied on UPI transactions.

The finance ministry had already clarified that person-to-person UPI payments would continue to be free under the proposed framework.

It has also said that if an MDR mechanism is introduced in future, it would be restricted to a limited category of merchant transactions crossing a specified value threshold. The charge would be nominal and significantly lower than the MDR generally applicable to debit and credit card transactions.

"Most transactions will remain free of charge for merchants on UPI," the finance ministry said.

Officials have indicated that more than 90% of transactions, including routine purchases of milk, vegetables and groceries, would not attract MDR even if such a framework is introduced.

The proposed mechanism, therefore, is not intended to impose a blanket charge on UPI transactions. Instead, any future MDR would be linked to specified categories and transaction values.

Small Merchants To Remain Outside Proposed MDR

Ms Sitharaman also sought to dispel concerns that small merchants and roadside vendors could be burdened with additional costs.

She said the government did not intend to impose MDR on small merchants, who have played a central role in the rapid expansion of digital payments through UPI.

The government's position is that the proposed amendment creates the legal space for a possible future framework but does not itself activate any fee, she added.

This distinction is significant because UPI has become a major part of India's everyday payment ecosystem, with consumers routinely using it for low-value purchases at shops, street vendors and other small businesses.

What the Amendment Does

The amendment to Section 10A of the Payment and Settlement Systems Act is intended as an enabling provision for a potential framework governing charges for certain digital payment transactions.

However, the passage of the provision does not mean that consumers will immediately start paying for UPI transactions.

Any decision on MDR would require a separate framework and consideration by the relevant UPI and NPCI bodies.

Ms Sitharaman's clarification was aimed at drawing a clear distinction between Parliament creating the legal provision and an actual decision to impose charges.

Parliament Completes Passage of Bill

The Rajya Sabha returned the Bill to the Lok Sabha with a voice vote after the finance minister responded to the discussion.

Since the legislation is a Money Bill, the Upper House's role is limited to making recommendations. The Lok Sabha has the final say on whether to accept or reject such recommendations.

With the Bill now completing the parliamentary process, the government has reiterated that the measure should not be interpreted as an immediate introduction of UPI charges.

For consumers, the key takeaway is that UPI payments remain free. Any future MDR, if introduced, would be aimed at specified merchant transactions and would not constitute a universal fee on the country's digital payment system.

The government has also stressed that everyday, low-value transactions—including purchases from small shops and roadside vendors—are expected to remain outside any such charge.

Comments

User

muscat2011.job

4 weeks ago

Once merchants are charged, they will pass it down to consumers.

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