UPI Amendment Doesn't Charge You Yet But It Removes the Law That Stopped It

UPI's fee-free status has rested on a fixed statutory guarantee since 2020, the Lok Sabha just replaced that guarantee with an executive notification power. No fee exists today, but the decision on one has moved out of Parliament's hands and into the government's. By Mahima Katal

New Delhi, Aug 6: For six years, one line of law did a lot of quiet work. Since January 2020, Section 10A of the Payment and Settlement Systems Act, 2007 has barred banks and payment providers from charging a Merchant Discount Rate on UPI transactions and RuPay debit cards, the fee that would otherwise be levied every time a shopkeeper accepts a digital payment. That single provision is widely credited as one of the reasons UPI scaled as fast as it did: no toll, no friction, no cost passed down to the person tapping their phone at checkout.

On Thursday, the Lok Sabha passed a Bill that rewrites that provision, and the rewrite is worth sitting with, because it changes something more fundamental than a fee.

The Taxation and Other Laws (Amendment) Bill, 2026 was introduced on August 4 to replace an ordinance issued back in June, and its scope is wide, tax exemptions for foreign investors, longer tax holidays for electronics manufacturers, relaxed rules for offshore fund managers relocating to India. Buried within that broader package, though, is a single amendment to Section 10A that touches nearly every UPI user in the country. Previously, the section's protection was tied to a fixed statutory reference: Section 269SU of the Income-tax Act, which names the specific electronic payment modes covered by the fee ban. The amendment strikes that reference out entirely. In its place, the law now reads that the protection extends to "one or more electronic modes of payment as the Central Government may, by notification, specify."

The distinction matters more than it might first appear. A rule embedded directly in statute can only be changed by Parliament through debate, a vote, and a public record of who supported what. A rule delegated to executive notification can be issued, narrowed, or reversed by the government alone, with none of that friction and considerably less visibility. What Parliament passed on Thursday was not a fee. It was a transfer of decision-making power over a fee, from the legislature, where UPI's zero-MDR status has lived since 2020, to the executive, where it can now be revisited at any time without returning to either House.

It's worth being precise about what has and hasn't happened. No charge exists today. UPI remains free to use, and the Bill itself does not impose any fee on any transaction. What it does is remove the legal wall that previously made such a fee impossible without fresh legislation. If the government does eventually notify a charge, most reporting suggests it would apply selectively to high-value merchant transactions rather than the routine, small-ticket payments that make up the bulk of UPI's daily use. Brokerage analysis cited in recent coverage estimated that transactions above ₹2,000 account for a small fraction of UPI's total transaction volume but a substantial share of its transaction value, which would let a targeted notification concentrate any cost on a narrow slice of activity without touching how most people use the app day to day.

Even so, the RBI Governor's response to the change is worth noting for what it doesn't do: it doesn't rule out a future fee, and it doesn't accept the premise that the current model is free in any absolute sense. Asked about the possibility of MDR charges returning, he called the discussion "premature," while also pointing out that the cost of running payment infrastructure at UPI's scale has to be borne by someone if not the person making the transaction directly, then diffused through the broader economy in ways less visible to the end user. That's a more honest framing than either "UPI will now cost you money" or "nothing has changed," and it's the framing this amendment actually supports: the cost question hasn't been resolved, it's been relocated out of Parliament's hands and into the government's, to be answered later, on its own timeline.

That relocation is the part of the story that deserves more attention than it's getting. Digital payments infrastructure at UPI's scale hundreds of billions of transactions a year, worth trillions of dollars is not a small policy lever, and how the government funds it, prices it, or subsidizes it is a legitimate and consequential question. What's changed is who gets to answer that question, and how much scrutiny their answer will face. A statutory guarantee obliges Parliament to have that conversation in public. A notification doesn't require the conversation to happen in public at all.