Taxation Bill 2026 Allows MDR on UPI & RuPay; 23.6 Bn UPI Transactions in July

Taxation and Other Laws Bill 2026 Allows MDR on UPI & RuPay Payments for Large Merchants

The government has introduced the Taxation and Other Laws (Amendment) Bill, 2026 to allow charging of Merchant Discount Rate (MDR) on UPI and RuPay debit card payments, especially for large merchants. This could end the zero-MDR regime for UPI, impacting millions of transactions. However, only 4% of P2M UPI transactions exceed Rs 2,000, so most users won't be affected.

RBI Introduces 0.4% MDR on UPI Transactions Above ₹2,000 for Merchants from Oct 15, 2026

Ending nearly six years of zero-MDR UPI, the government introduces a 0.4% fee on merchant transactions above ₹2,000 from October 15, 2026. This shift aims to ensure long-term sustainability of India's digital payments ecosystem. Importantly, all person-to-person (P2P) and small merchant payments (below ₹2,000) remain free for users.

NPCI Imposes 0.4% MDR on UPI P2M Transactions Above Rs 2,000 from Oct 15, 2026

UPI transactions above Rs 2,000 will now attract a 0.4% Merchant Discount Rate (MDR, capped at Rs 300) from October 15, 2026, for person-to-merchant (P2M) payments. This reverses the zero-MDR policy adopted in 2020, aiming to make the UPI ecosystem financially sustainable. Over 95% of transactions remain unaffected, and critical services like rail tickets and utility bills have a flat Rs 5 fee.

Taxation and Other Laws (Amendment) Bill 2026 Allows MDR on UPI: Subsidy Falls to ₹2,000 Cr in FY27

UPI, currently free for users, may become chargeable after the government introduced the Taxation and Other Laws (Amendment) Bill, 2026. The Bill allows the government to notify transactions that can attract Merchant Discount Rate (MDR), potentially ending the zero-MDR regime. For students, this is a key economy/polity topic linking digital payments, financial inclusion, and fiscal policy.

UPI@10 Years: 86% of Digital Transactions, Government Allows Merchant Fees Under PSS Act Amendment

UPI completes 10 years with 86% of India's digital transactions, but the zero-MDR model is ending. The government has amended the PSS Act to allow merchant fees, aiming to fund the next growth phase in rural areas and cross-border payments. Key challenge: balancing inclusion with sustainability.

Lok Sabha Passes Bill to End Zero MDR Guarantee for UPI; Govt Can Now Notify Charges on Merchants

The Taxation and Other Laws (Amendment) Bill, 2026, passed without debate, removes the statutory zero-MDR guarantee for UPI, allowing the government to impose charges on merchants. This affects 55 crore users and the digital payments ecosystem. The Bill also provides 15-year tax exemptions for foreign electronics manufacturers and simplifies rules for fund managers, raising concerns about asymmetry between domestic and foreign stakeholders.

Govt Proposes 0.25-0.5% MDR on UPI Transactions Above ₹2,000 via PSS Act Amendment

The government has proposed allowing a Merchant Discount Rate (MDR) of 0.25-0.5% on UPI transactions above ₹2,000 via an amendment to Section 10A of the Payment and Settlement Systems Act, 2007. This reverses a decade-long zero-MDR policy, potentially undermining financial inclusion, formalisation, and investment in UPI infrastructure. While only 5% of transactions by volume are affected, they account for 65% of transaction value, making this a significant policy shift.

Lok Sabha Passes Bill Amending Payment Act to Allow Charges on UPI Transactions

Lok Sabha passed the Taxation and Other Laws (Amendment) Bill, 2026 which amends the Payment and Settlement Systems Act, 2007 to allow the government to permit banks and service providers to levy charges on UPI and other notified electronic payment modes. This marks a major policy shift from the current zero-charge regime for UPI transactions.