Summary of this article
Parliament passes Taxation Amendment Bill 2026.
No new UPI charge on consumers.
Centre gets greater payment-mode flexibility.
Parliament has passed the Taxation and Other Laws (Amendment) Bill, 2026, which introduced several changes to India’s tax framework and modified the legal provisions that govern electronic payments. While the legislation does not impose any charges on Unified Payments Interface (UPI) transactions, the amendment gives the Centre greater flexibility to decide which payment mode will continue to be protected from any additional transaction charges.
The Rajya Sabha approved the bill on Tuesday after it had already been cleared in the Lok Sabha. With the parliamentary process being complete, the legislation will be sent to the President for assent.
Under the existing provision of Section 10A of the Payment and Settlement Systems Act, 2007, payment system providers are not allowed to levy any additional charges on individuals who pay through electronic modes as prescribed under Section 269SU of the Income Tax Act, 1961.
The amendment removes the specific reference to Section 269SU. In its place, as per a report by LiveLaw, the Central Government may specify one or more modes of payment that will remain covered by the no-charge framework. Once in effect, the government will have the authority to determine which digital payment methods receive statutory protection from transaction charges. This change has raised concerns for UPI users who use an MDR-based system, which levies transaction costs borne by merchants rather than consumers.
However, the Finance Minister Nirmala Sitharaman has clarified that the amendment should not be viewed as imposing a tax or charge on UPI. She said UPI transactions would continue to remain free for consumers. Moreover, no Merchant Discount Rate (MDR) framework has been finalised.
What Does The Bill Focus On?
Apart from the above provisions, the Bill contains several tax-related measures which seek to rationalise the conditions applicable to eligible investment funds and fund managers, with the objective of encouraging fund management activities in India.
The legislation also provides tax exemptions on interest and capital gains from government securities for specified foreign institutional investors and the Bank for International Settlements.
The Bill further provides tax relief for foreign companies storing components in customs-bonded warehouses for supplying Indian contract manufacturers. This exemption will be made available until the tax year ending on March 31, 2041. For UPI users, the immediate takeaway is that there is no new UPI charge levied on consumers
