Lok Sabha has cleared a Bill allowing the government to permit charges on UPI and other digital payments in the future. Here are five key things to know about what the amendment means for users, merchants and the payments ecosystem
India’s popular Unified Payments Interface (UPI) may no longer remain legally locked into a zero-charge framework, after the Lok Sabha passed a Bill that allows the government to permit banks and payment service providers to levy charges on certain digital payment transactions.
The move does not mean users will start paying a fee every time they make a UPI payment. The amendment only creates a legal framework that allows the Centre to notify electronic payment modes where charges can be introduced in the future.
The changes were introduced through the Taxation and Other Laws (Amendment) Bill, 2026, which also amended provisions of the Payment and Settlement Systems Act, 2007.
Here are five key things to know about what the Bill means for UPI users, merchants and the digital payments ecosystem.
1. UPI payments will not become chargeable immediately
The biggest takeaway is that the Bill does not introduce any direct fee on UPI transactions.
The amendment gives the government the authority to allow charges on certain electronic payment modes through a notification at a later date. Any decision on whether to introduce charges, the rate of such charges and the categories of transactions covered will come separately.
More from BusinessFor now, consumers can continue using UPI without paying any transaction fee.
The government has promoted UPI as a low-cost public digital infrastructure, helping millions of Indians shift from cash-based payments to digital transactions.
2. What has changed in the law?
The amendment removes the existing legal restriction that prevented banks and payment service providers from charging a Merchant Discount Rate (MDR) on specified electronic payment modes.
Earlier, Section 10A of the Payment and Settlement Systems Act prohibited banks and payment system providers from imposing charges on electronic modes of payment prescribed under Section 269SU of the Income Tax Act.
The amended provision allows the Centre to specify one or more electronic payment modes where charges can potentially be levied.
In simple terms, the government now has the legal flexibility to design a payment fee structure if it believes it is needed to support the digital payments ecosystem.
3. Who could pay if UPI charges are introduced?
The debate around UPI charges has largely focused on the Merchant Discount Rate, or MDR.
MDR is a fee paid by merchants to banks, payment companies or payment networks for processing digital transactions. Currently, UPI payments do not carry MDR, which has helped small businesses and consumers adopt digital payments rapidly.
If MDR is introduced in the future, the charge is more likely to be linked to merchant transactions rather than everyday person-to-person transfers.
However, the government has not announced any final framework on who would bear the cost or how much the charge could be.
4. Why are banks and fintech companies seeking a new payment model?
UPI has grown into one of the world’s largest real-time payment networks, processing billions of transactions every month.
While the platform has expanded financial inclusion and made digital payments accessible, banks and payment companies have argued that maintaining the infrastructure requires significant investment.
Payment firms need to spend on technology upgrades, cybersecurity, fraud prevention and transaction processing systems.
Industry stakeholders have repeatedly argued that a sustainable revenue model is needed to support future expansion of the payments ecosystem.
Reserve Bank of India Governor Sanjay Malhotra recently said that investment in payment infrastructure would continue to be necessary and that “someone has to pay” for maintaining such systems.
5. Will your everyday UPI payments become expensive?
For now, there is no indication that routine UPI payments between individuals or small-value transactions will become chargeable.
The government will have to decide which categories of transactions, if any, could attract charges.
A major reason behind UPI’s success has been its simplicity and zero-cost user experience. Any move to introduce fees is expected to be carefully calibrated to avoid slowing adoption, particularly among small merchants and consumers.
The amendment is therefore less about an immediate fee change and more about giving policymakers the option to create a sustainable funding model for India’s digital payment infrastructure.
As UPI continues to expand, the government faces the challenge of balancing two objectives — keeping digital payments affordable while ensuring that the ecosystem has enough resources to support future growth.
