Unified Payments Interface (UPI) transactions exceeding ₹2,000 may soon be subject to a merchant fee, following the introduction of a new legislative bill in the Indian Parliament. This amendment targets the Payment and Settlement Systems Act, 2007, as reported by several news outlets.
Amendments to Section 10A
Currently, Section 10A of the Payment and Settlement Systems Act, 2007, prohibits banks from charging individuals for electronic payments, including those made via UPI. However, this may change with the new bill introduced by Union Minister for Finance and Corporate Affairs, Nirmala Sitharaman. The Taxation and Other Laws (Amendment) Bill, 2026 (Bill No. 150 of 2026), was presented in the Lok Sabha to propose crucial amendments to multiple laws, including the Payment and Settlement Systems Act, 2007, the Income Tax Act, 2025, and the Finance Act, 2026.
Clause 2 of the Bill proposes to amend Section 10A, enabling the government to impose charges on specific electronic payment modes as defined by future notifications. This move could pave the way for the reintroduction of the Merchant Discount Rate (MDR) on UPI transactions of higher value. Since January 2020, MDR has not been applied to RuPay debit cards and UPI transactions.
Implications for High-Value Transactions
The government may authorize a Merchant Discount Rate (MDR) ranging from 0.25% to 0.4% on UPI payments made to businesses for amounts over ₹2,000. Personal transactions, however, would remain unaffected, as reported by the Times of India. This proposed amendment could mean that large merchants, such as e-commerce giants Amazon and Flipkart, could start incurring MDR fees on UPI and RuPay debit card payments, according to The Indian Express.
While the groundwork for these changes is being laid, Reuters reported that no final decision has been made regarding the specific fee structure or the exact applications of these charges. The potential introduction of these fees marks a significant shift in India’s digital payment landscape, underscoring the government’s evolving approach to electronic transactions.
