The Indian government is exploring the possibility of levying charges on certain high-value UPI payments, primarily affecting merchants, as part of a proposed legislative change that could reintroduce merchant discount rates and alter the landscape of digital transactions in the country.
India may be moving towards a new charge on some UPI payments, after Finance Minister Nirmala Sitharaman introduced the Taxation and Other Laws (Amendment) Bill, 2026 in the Lok Sabha on Tuesday. According to Bar and Bench, the draft law would amend the Payment and Settlement Systems Act, 2007 so the government can notify charges on certain electronic payment methods. If the measure becomes law, it could give officials a route to reintroduce a merchant discount rate, or MDR, on selected high-value UPI transactions.
For households, the immediate point is that this is not a fee on ordinary person-to-person UPI transfers. The move is aimed at payments made to merchants, which means the practical impact would fall more on shops, service providers and platform businesses than on someone sending money to a friend or family member. Since January 2020, RuPay debit card and UPI payments have been free of MDR, so the proposal would mark an important policy shift in India’s digital payments system.
There is also a precedent to keep in mind. As Business Standard, Mint, The Quint, fi.money and DesiDime have reported, the National Payments Corporation of India introduced an interchange fee of up to 1.1% from 1 April 2023 on merchant UPI payments above ₹2,000 made through prepaid payment instruments such as wallets. That charge applied only to merchants, not customers, and did not affect bank-to-bank UPI transfers. The new Bill appears to widen the legal space beyond that earlier PPI-specific framework.
For small businesses, the difference matters because MDR or interchange fees can affect payment acceptance costs, pricing and margins, even if the customer sees no charge at checkout. For consumers, the bigger question is whether merchants ultimately absorb the cost or pass some of it on indirectly through prices. The Bill’s wording suggests the government wants flexibility to notify which payment modes can attract charges, so the next thing to watch is the precise scope of any future notification and whether high-value UPI payments are specifically included.
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