Lok Sabha Passes Taxation Laws Amendment Bill, Clearing Path To Levy MDR On UPI Payments

The Lok Sabha on Thursday (August 6) passed the bill amending the Taxation and Other Laws (Amendment) Bill, 2026, to further amend the Payment and Settlement Systems Act, 2007. The amendments clear the path for the central government to introduce merchant discount rates (MDR) on UPI transactions.

Finance minister Nirmala Sitharaman introduced the bill to amend the Payment and Settlement Systems Act, 2007, today in the Lok Sabha. Now, the bill will be proposed in the Rajya Sabha. 

On social media platform X, Sitharaman said, “MDR applies only on the merchants and not on the end users/customers. It will support the banks and fintech to invest more on infrastructure, innovation & security. All users of UPI will reap the benefits of this investment.”

She further added, “The UPI and Services Steering Committee headed by NPCI is yet to decide on the MDR. This will happen after the Parliament passes the Taxation and Other Laws (Amendment) Bill, 2026, which proposes to amend Section 10A of the Payment and Settlement Systems Act, 2007.”

Only a day ago, the Reserve Bank of India’s (RBI) governor Sanjay Malhotra mentioned that consumers have to ultimately pay for the transactions in some way or the other. 

Meanwhile, the industry has been backing the reintroduction of the MDR on UPI. Yesterday, the Confederation of All India Traders (CAIT) showed its support for a nominal MDR on higher-value UPI transactions if proposed by the government.

As per reports, the government is expected to levy a 0.25-0.4% MDR on UPI transactions above ₹2,000 made to businesses. Meanwhile, normal, P2P transactions are likely to remain exempted.

UPI transaction volume saw a 4% monthly growth to 23.66 Bn in July, according to data released by the National Payments Corporation of India (NPCI), while the total transaction value increased 3% M-o-M to ₹29.88 Lakh Cr during the month under review.

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