The Lok Sabha has passed the Taxation and Other Laws (Amendment) Bill, 2026, paving the way for the government to permit banks and payment service providers to levy charges on Unified Payments Interface (UPI) transactions and other notified electronic payment systems.

The legislation amends the Payment and Settlement Systems Act, 2007, removing the legal restriction that currently prevents banks and payment service providers from charging Merchant Discount Rate (MDR) on notified digital payment modes.

What Does the New Bill Change?

The amendment authorises the Central Government to decide whether charges can be imposed on specific electronic payment modes through future notifications.

Importantly, the Bill does not immediately introduce any UPI charges. Instead, it creates the legal framework that allows the government to permit such charges at a later stage.

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Why Is the Government Making This Change?

According to the government’s approach, the objective is to create a sustainable revenue model for:

• Banks
• Payment Service Providers (PSPs)
• Digital payment infrastructure companies

The proposal seeks to ensure that the ecosystem supporting India’s rapidly growing digital payments network remains financially viable while keeping costs reasonable for consumers and small businesses.

Merchant Discount Rate (MDR) Explained

Merchant Discount Rate (MDR) is the fee paid by merchants to banks and payment service providers for processing digital transactions.

While payment systems such as:

• RTGS
• NEFT

already involve service charges, UPI transactions have remained exempt from MDR since 2020.

The amendment removes the statutory barrier that prevented the government from allowing MDR or similar charges on notified electronic payment systems.

Bill Passed by Voice Vote

The Bill was passed through a voice vote in the Lok Sabha after the House resumed proceedings at 2 PM following an earlier adjournment.

Finance Minister Nirmala Sitharaman moved the Taxation and Other Laws (Amendment) Bill, 2026, which proposes amendments to:

• Payment and Settlement Systems Act, 2007
• Income Tax Act, 2025
• Finance Act, 2026

What Happens Next?

Although the Bill has been passed by the Lok Sabha, UPI transactions will continue under the existing framework until the government issues a notification specifying:

• Which electronic payment modes may attract charges.
• Whether charges will apply only to merchants or other categories.
• The rate and scope of any future fees.

Until such notifications are issued, there is no immediate change in how UPI payments are processed.

Key Highlights

• Lok Sabha has passed the Taxation and Other Laws (Amendment) Bill, 2026.
• The Bill amends the Payment and Settlement Systems Act, 2007.
• The amendment authorises the government to permit charges on UPI and other notified electronic payment modes.
• The legal restriction preventing Merchant Discount Rate (MDR) on notified payment systems has been removed.
• The Bill does not immediately impose UPI charges.
• Future charges, if any, will depend on government notifications.
• The proposal aims to support banks, payment service providers and digital payment infrastructure companies with a sustainable revenue model.

FAQs

Has the Lok Sabha approved UPI transaction charges?

The Lok Sabha has passed a Bill that authorises the government to permit charges on UPI and other notified electronic payment modes. It does not immediately impose any charges.

Will users start paying for UPI transactions now?

No. The Bill only provides the legal framework. Any charges will require a separate government notification.

What is Merchant Discount Rate (MDR)?

Merchant Discount Rate (MDR) is a fee paid by merchants to banks and payment service providers for processing digital payments.

Why was the law amended?

The government says the amendment aims to create a sustainable financial model for banks, payment service providers and digital payment infrastructure while supporting continued growth of digital payments.

Which law has been amended?

The amendment modifies the Payment and Settlement Systems Act, 2007 as part of the Taxation and Other Laws (Amendment) Bill, 2026.

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The debate over UPI transaction charges has intensified after RBI Governor Sanjay Malhotra indicated that India’s digital payment infrastructure cannot remain cost-free indefinitely.

Speaking after the Reserve Bank of India’s monetary policy announcement, Malhotra said it is too early to conclude whether charges will be introduced but acknowledged that someone ultimately has to bear the cost of operating the UPI ecosystem.

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What Did the RBI Governor Say?

Responding to a question on whether UPI transactions could soon attract charges, RBI Governor Sanjay Malhotra said:

“It is very premature to talk right now. The government is still carrying out the amendment. The costs have to be paid by someone.”

He added that the priority is to ensure India’s digital payments infrastructure continues to grow and remain sustainable.

Malhotra further clarified that the costs already exist but are currently being absorbed elsewhere.

“The cost is already getting passed on. It may not be directly to the user, but someone is paying the cost.”

Why Is MDR Being Discussed Again?

UPI transactions are currently free for consumers as well as merchants because the government removed the Merchant Discount Rate (MDR) on UPI payments in January 2020.

Instead, the government has compensated banks and payment service providers through incentive schemes.

However, with UPI processing billions of transactions every month, the cost of maintaining payment infrastructure has increased substantially, while government subsidies cover only part of these expenses.

This has revived discussions on bringing back MDR for certain transactions.

What Is Being Proposed?

According to reports, amendments to the Payment and Settlement Systems Act, recently tabled in Parliament by Finance Minister Nirmala Sitharaman, could allow MDR on select UPI transactions.

The proposal under discussion includes:

• MDR of 0.3% to 0.5%
• Applicable only on transactions above ₹2,000
• Limited to large merchants crossing a specified turnover threshold

No final decision has been announced.

Will Consumers Have to Pay?

Based on the proposal currently being discussed, ordinary consumers are not expected to pay any fee.

Instead, the MDR would be charged to eligible large businesses accepting UPI payments.

This means:

• Paying your neighbourhood grocery or vegetable vendor would likely remain free.
• Large retail chains accepting high-value UPI payments could pay a small processing fee.

However, the proposal is still under consideration and no final rules have been notified.

Why Does UPI Need Funding?

Although UPI appears free to users, operating the network involves significant costs, including:

• Payment processing infrastructure
• Bank settlement systems
• Fraud detection and cybersecurity
• Technology upgrades
• Server maintenance
• Customer support

Currently, these expenses are shared between the government, banks and payment service providers.

The RBI Governor indicated that a long-term funding mechanism will be necessary to keep the ecosystem sustainable.

What Happens Next?

At present, no UPI charges have been introduced.

The proposed legal amendments simply create the possibility of reintroducing MDR for specific categories of merchant transactions.

Whether the government ultimately chooses MDR or another funding model remains to be seen.

Until an official notification is issued, UPI payments for consumers continue to remain free.

Key Highlights

• RBI Governor Sanjay Malhotra said it is too early to confirm UPI transaction charges.
• He stated that someone must ultimately bear the cost of running UPI infrastructure.
• Parliament is considering amendments that could permit MDR on certain UPI transactions.
• Reports suggest MDR of 0.3%–0.5% may apply only to transactions above ₹2,000 at eligible large merchants.
• Everyday consumer UPI payments and small merchants are expected to remain unaffected under the proposal.
• No final decision has been announced by the government.

FAQs

Are UPI transactions becoming chargeable?

No. UPI transactions remain free. The government is considering amendments that could allow MDR on certain merchant transactions, but no final decision has been announced.

What did the RBI Governor say about UPI charges?

RBI Governor Sanjay Malhotra said it is premature to discuss charges but noted that maintaining the UPI ecosystem involves costs that “have to be paid by someone.”

What is Merchant Discount Rate (MDR)?

MDR is a fee paid by merchants to banks and payment service providers for processing digital payment transactions.

Will consumers have to pay UPI charges?

Based on the proposal being discussed, consumers are not expected to pay directly. Any MDR, if introduced, would likely apply to eligible large merchants on higher-value transactions.

Will small shopkeepers be affected?

According to the proposal under discussion, small merchants and routine consumer UPI payments are expected to remain outside the scope of MDR.

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Accounts will be synced with the UPI system

According to the news, post offices are not able to accept digital payments right now as their accounts are not synced with the UPI (Unique Payment Interface) system. An official source said that the postal department is implementing its IT infrastructure which will have new applications that will be able to transact with dynamic QR codes. The rollout will be completed in all post offices by August 2025.

Pilot rollout begins in Karnataka circle

The pilot rollout of this system under IT 2.0 has been started in Karnataka Circle. QR-based booking of mail products was successfully done at Mysore Head Office, Bagalkot Head Office and its subordinate offices. The Postal Department had initially introduced static QR codes at sales counters in post offices to enable digital transactions. But due to frequent technical problems and customer complaints, the idea had to be discontinued.

The government has taken this initiative regarding the post office

The government plans to transform India into a large logistics organisation with 1.5 lakh rural post offices. Post offices have undergone a major transformation in recent years and efforts are being made to make them the backbone for financial inclusion of communities in rural India, especially women. According to the government, while on an average women have 20 per cent accounts in national banks, since the launch of the Post Payments Bank of India, more than 45 per cent of the accounts opened are held by women.

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Merchant Discount Rate. Till now, neither the customer has to pay any charge for making payment through UPI nor any fee is taken from the traders. This is called Zero MDR Policy. But now this system can change on UPI payments of Rs 3,000 or more.

What is MDR fee?

MDR is actually a fee that banks or payment app companies charge traders when a customer makes a payment through UPI. The government is currently thinking of imposing such a charge only on transactions of more than Rs 3,000. This means that common people who make small everyday purchases through UPI, such as ordering vegetables, groceries, milk or food online, will not be affected.

Why is the government considering imposing MDR?

The purpose of this proposal is to provide a permanent source of income to banks and UPI payment companies so that they can run this service for a long time without any loss. The Payment Council of India has already recommended the government to end the Zero MDR policy. The need for this change is also being felt because the use of UPI is increasing tremendously in India.

On June 1, 2025, there were 644 million (64.4 crore) UPI transactions.

On June 2, 2025, this figure reached 650 million (65 crores).

These figures indicate that UPI is now set to overtake international payment companies such as Visa. For example, Visa’s average daily transaction is estimated to be around 639 million. In May 2025, there were more than 14 billion (1,400 crore) UPI transactions in India, with a total value of more than Rs 20 lakh crore.

The government says that if a small MDR is charged on large transactions, then the digital payment system can be strengthened further and banks will be helped in its operation. At present, this proposal is in initial discussions, and before implementing it, the government will talk to traders and payment companies. But it is certain that small payments through UPI will remain free for common people as before.

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Online payments have become a convenient option to send money instead of standing in long queues at bank branches or ATMs while digital payments through Unified Payments Interface (UPI) are convenient and easy, though at times prone to errors Because wrong UPI ID or account number can lead to wrong transaction.

There are two common problems many people often face while making transfers online through UPI Payments – wrong amount transfer or transfer amount to the wrong person. However, in such cases one need not panic as the money can be easily obtained.

In case of wrong online payment, all you have to do is call the customer care of payment platforms like GPay, PhonePe, Paytm UPI. Register a complaint by sharing transaction details. In addition to this, you will also have to file a complaint with your bank.

Make a complaint

RBI guidelines state that in case of erroneous payment, the money can be refunded within 48 hours of the complaint. It is important to note that the complaint should be lodged within 3 days of the transaction. Similarly, whenever a payment is made to a wrong bank account through UPI or net banking, the first step is to call the number provided by the government or RBI and lodge a complaint.

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Give all the information, after that go to the concerned bank and fill a form, which has all the information. If the bank refuses to help, complain to the Ombudsman of the Reserve Bank of Indiabankingombudsman.rbi.org.in Do it.

Remember not to delete the transaction message from the phone as it contains the PPBL number which is required at the time of complaint. Do not forget to mention this number in the complaint form along with all other details and your complaint.

Be careful

In addition, you can also file a complaint about erroneous transactions through the website of the National Payments Corporation of India (NPCI), the body created by the Reserve Bank of India that provides UPI services. Always remember to be careful while entering the recipient’s UPI ID, their phone number, the amount being transferred and the UPI PIN of your account.

If any of these go wrong, you could end up sending the wrong amount to the recipient or the right amount to the wrong person and unnecessarily lose money. It is common to make a mistake while making a hasty payment, so avoid it at all costs.

The post UPI Money Tranfer: Sent money to wrong UPI using PhonePe, GPay, Paytm? Here’s How You Can Retrieve it first appeared on Rightsofemployees.com.

During the last one year, many banks have expanded this facility and now the name of Canara Bank has also been added to this list. Now the customers of Canara Bank can also make payment through UPI (RuPay Card UPI Payment) from their RuPay card.

The bank gave this information in the statement

Canara Bank and National Payments Corporation of India (NPCI) issued a joint statement giving this information. It was said in the statement that now the customers of Canara Bank will be able to use their RuPay Credit Card on BHIM App and other UPI Apps. When Canara Bank customers link their RuPay Credit Card with a UPI ID, they will be able to make instant, secure payments.

Benefits to customers and shopkeepers

Now Canara Bank customers will be able to take advantage of increased opportunities by having the facility to use credit cards on UPI, while merchants will also benefit as they will be able to accept credit cards using features like QR codes, NPCI said. And will be able to become a part of the credit card ecosystem.

Started last year

Let us tell you that after the MPC meeting of June last year (RBI MPC Meet June 2022), the Reserve Bank had given the facility to link the credit card with UPI. Then the RBI had said that the facility to make credit card payments on the UPI platform would provide more options to the customers than before. Linking of credit card with UPI has been started with RuPay Credit Card.

Now the customers of these banks will benefit

However, not all banks have got the green signal from the Reserve Bank to use this feature. Although almost all banks, especially government banks, issue RuPay credit cards, but only a few banks’ customers can use their RuPay cards on the UPI platform. So far, the Reserve Bank had given its approval to Punjab National Bank, Union Bank of India and Indian Bank for this. Now Canara Bank has also got this facility.

Link credit card with UPI app like this (How to link RuPay Credit Card with UPI)…

• First open the UPI payment app.
• Click on profile picture.
• Go to the Payment Settings option.
• Select the Add Credit/Debit Card option.
• Enter Card Number, Valid Upto Date, CVV, Cardholder Name etc.
• After giving all the information, click on the save button.

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This figure has crossed 36 crores. In February 2022, this figure was 24 crores. Inaugurating the Digital Payment Awareness Week at the RBI head office, Shaktikanta Das said that in terms of value, this transaction is Rs 6.27 lakh crore.

The figure has crossed 1000 crores , this figure is 17 percent more than the Rs 5.36 lakh crore recorded in February 2022. He said that monthly digital payment transactions have been crossing the Rs 1,000 crore mark every time for the last three months. The RBI governor said that since the agreement between UPI and Singapore’s Penau, many other countries have also expressed their desire to enter into such an agreement for payments.

After 10 days of signing the UPI-Penau agreement, the governor told that at least half a dozen countries will make this agreement. Das said that it has been 10 days since the UPI-Penau agreement was signed. During this period, there were 120 transactions for sending money from Singapore and 22 transactions for sending money to Singapore.

Das said, ‘We have taken several steps for internationalization of our payment system and cross-border linkage of India-Singapore’s Prompt Payment System.’

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