The Centre has introduced the Taxation and Other Laws (Amendment) Bill, 2026 in the Lok Sabha, proposing legal changes that could allow merchant charges on select high‑value Unified Payments Interface (UPI) transactions in the future.
While no final decision or timeline has been announced, the move could mark a major shift in India’s digital payments framework.
The proposed amendments to the Payment and Settlement Systems Act, 2007 would create a legal basis for banks and payment service providers to levy charges on certain electronic transactions. Sources said that if implemented, the Merchant Discount Rate (MDR) may initially apply only to UPI payments exceeding ₹2,000 made to large businesses, leaving everyday low‑value transactions unaffected.
According to estimates, transactions above ₹2,000 account for only about 5 per cent of total UPI volume but nearly 65 per cent of overall transaction value. Routine payments for groceries, taxis, or small purchases are unlikely to attract any fees under the proposed framework.
The National Payments Corporation of India (NPCI) reported that UPI processed 23.66 billion transactions worth Rs 29.9 lakh crore in July 2026, underscoring its dominance in India’s digital economy.
Industry experts say the Bill could provide the legal foundation for a future MDR structure, helping sustain infrastructure costs and encourage innovation in the payments ecosystem. However, they caution that the proposal remains at an early stage, with no approved fee model or implementation schedule yet.
