India’s parliament has approved a tax amendment bill to simplify digital payment laws and reassure users that UPI transactions will remain free, as the government seeks to attract foreign investment and expand domestic financial activity.
India’s parliament has passed a tax amendment bill after the government moved to dispel concerns that users could be charged for UPI transactions, with Finance Minister Nirmala Sitharaman saying the system will remain free for consumers. According to the government’s explanation in the Rajya Sabha, the legislation does not create any new tax on Unified Payments Interface payments, and it is intended instead to simplify the legal framework around digital payments and other financial rules.
Sitharaman said UPI has been free since launch and would stay that way, pushing back against claims that the bill opened the door to user charges. The legislation, which had already cleared the Lok Sabha, also seeks to separate the Payment and Settlement Systems Act from the Income Tax Act and give the government greater flexibility over the zero-MDR model, the rule that prevents merchants or customers being directly charged for UPI and RuPay debit card payments. Moneycontrol reported earlier this year that the Union Budget set aside ₹2,000 crore to support UPI and RuPay transactions, while The Economic Times said industry groups have warned that the sum may not be enough to sustain the free-payment model.
Beyond the UPI row, the Taxation and Other Laws (Amendment) Bill, 2026, is meant to encourage foreign investment and make India more attractive for fund managers and overseas cloud companies. The bill replaces the June 5 ordinance that granted tax relief on interest income and capital gains for foreign portfolio investors in government securities. It also reduces some of the conditions fund managers must meet before relocating operations to India, as the government looks to draw more capital and expand domestic financial activity.
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