The Indian government’s latest legislation risks reshaping the country’s digital economy by potentially reintroducing fees on UPI transactions and increasing foreign access, amidst accusations from Congress of capitulating to US trade pressures.
Congress on Thursday accused the Modi government of quietly paving the way for charges on UPI payments and for greater room for American payment firms in India’s digital economy, after the Lok Sabha passed the Taxation and Other Laws (Amendment) Bill without debate amid Opposition uproar. Jairam Ramesh, the Congress general secretary, said the legislation removes the existing statutory protection that has kept UPI free and could allow Merchant Discount Rate fees to return in some form.
Ramesh said the change would eventually be paid for by ordinary users and rejected the government’s argument that fees are needed to make the payments system sustainable. He pointed to the Reserve Bank of India’s large surplus transfer to the government and said only a fraction of that amount would be needed to support UPI as digital public infrastructure. He also linked the bill to a 2026 US Trade Representative report that criticised UPI and RuPay for being free and said they had displaced American platforms such as Visa and Mastercard.
The bill amends the Payment and Settlement Systems Act, 2007, and would replace the present reference to specific tax-linked payment modes with a broader power for the central government to notify which electronic payment methods must remain free. At present, banks and payment-system providers cannot directly or indirectly charge users for UPI or RuPay debit-card transactions. The government says the wider amendments are meant to create legal certainty, attract more foreign capital, support domestic electronics manufacturing and make it easier for foreign cloud companies to use Indian data centres.
The legislation also replaces a June 5 ordinance on tax exemptions for certain foreign portfolio investors and relaxes conditions for some fund managers looking to move operations to India. Against that backdrop, Ramesh argued the payment changes were part of a wider pattern in which New Delhi has yielded to pressure from Washington. His remarks came as the Trump administration has taken a harder line on trade, releasing a 2026 National Trade Estimate report in March, naming India on its Priority Watch List in April and in June finding Brazil’s digital trade and electronic payment policies to be unreasonable barriers to US commerce.
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