Parliament Clears Taxation Bill; FM Re-assures No MDR On P2P UPI Payments

In what could pave the way for a merchant discount rate (MDR) on certain UPI payments, the Parliament today cleared The Taxation and Other Laws (Amendment) Bill, 2026.

This came after Rajya Sabha cleared the bill via a voice vote after a brief discussion and reply by Finance Minister (FM) Nirmala Sitharaman. With this, the proposed tax laws have been sent back to Lok Sabha.

For context, the aforementioned taxation bill has been categorised as a money bill. Under the Constitution, the Rajya Sabha cannot reject or amend the money bill, and can only suggest non-binding recommendations to the Lok Sabha.

In a post on X, FM Sitharaman said that the UPI and Services Steering Committee, headed by the National Payments Cooperation of India (NPCI), will now consider and decide whether any MDR should be introduced and, if so, its scope and structure.

Meanwhile, addressing the Parliament, Sitharaman reiterated that end-customers will not bear a separate charge on UPI transactions.

“The bill proposes to amend section 10A of the Payment and Settlement Systems Act (PSSA), 2007. The amendment is an enabling provision. It does not impose any tax or transaction charge on UPI users. It enables the government to specify through notification the electronic payment modes that will continue to receive statutory protection against charges,” the FM informed the Parliament. 

She also reaffirmed that “no MDR framework has yet been finalised”.

This follows the Lok Sabha passing The Taxation and Other Laws (Amendment) Bill, 2026, which aims to further amend the PSSA 2007. Unlike the earlier blanket ban, the amendments now empower the Centre to impose MDR on certain electronic payment transactions. 

While the MDR proposal is still under consideration, Inc42 last month reported that the Union government was mulling imposing an MDR of 0.05% to 0.07% on UPI transactions above ₹2,000 for merchants with an annual turnover of more than ₹1 Cr to ₹1.5 Cr. 

Meanwhile, P2P transactions are likely to remain exempted as the finance ministry clarified last week. The ministry also said then that MDR, even if introduced, would apply only to a limited set of merchant transactions above a specified threshold and will be levied at a nominal rate. 

Amid the heated debate over MDR, Reserve Bank of India (RBI) governor Sanjay Malhotra last week also said that talks of imposing the fee are still at a premature stage right now. He, however, added that “someone” would have to ultimately pay for the transactions in some way or the other. 

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