India’s recent passage of the Taxation and Other Laws (Amendment) Bill 2026 reignites the debate over who should fund the rapidly growing digital payments infrastructure, with potential implications for the zero merchant discount rate regime and transaction charges on UPI.
The Lok Sabha’s passage of the Taxation and Other Laws (Amendment) Bill, 2026 has reopened a long-running policy argument over who should pay for India’s fast-expanding digital payments network. According to Business Standard, the measure would amend the Payment and Settlement Systems Act, 2007 to give the Centre the power to decide which electronic payment methods remain free and which may attract charges. The Bill does not set out any fee, rate or timetable, but it creates room to revisit the zero merchant discount rate regime and, in time, could allow charges on some Unified Payments Interface transactions.
That possibility matters because UPI has become central to everyday commerce. Business Standard reported that the system now handles nearly 660 million transactions a day, from small street purchases to large retail payments. Since January 2020, UPI and RuPay debit cards have been exempt from MDR to encourage adoption, but the infrastructure behind those payments still has to be maintained and upgraded. Banks, payment service providers, payment aggregators and the National Payments Corporation of India bear much of that cost, while the government’s incentive scheme meets only part of the bill, according to the report.
The debate now is less about whether digital payments should continue to grow than about how they should be financed without undermining the ecosystem that supports them. That issue sits within a wider legislative pattern this year: in April, the Lok Sabha passed the Jan Vishwas (Amendment of Provisions) Bill, 2026 to trim minor offences and ease compliance, and in March it cleared the Finance Bill, 2026 with changes aimed at reducing litigation and improving the tax environment. Against that backdrop, the latest payments amendment looks like another sign that policymakers are trying to balance consumer convenience, business sustainability and the costs of running public digital infrastructure.
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