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Big change in UPI policy
Big change in UPI policy? Payments above ₹2,000 may carry a fee. What we know
Big change in UPI policy? Payments above ₹2,000 may carry a fee. What we know
The bill seeks to remove the provision that prevents banks and payment service providers from charging a fee, including MDR, on notified electronic payments.
Updated on: Aug 5, 2026, 11:09:30 IST Edited by Asmita Ravi Shankar Prefer HTon Google Share via Copy link A major policy change might be headed towards the free Unified Payments Interface (UPI), with Finance Minister Nirmala Sitharaman introducing the Taxation and Other Laws (Amendment) Bill, 2026, in the Lok Sabha. The objective of zero MDR on UPI payments was to make digital transactions more affordable and widely accessible. (MINT) UPI, one of the world's largest real-time payment interfaces, processed 23.6 billion transactions worth ₹29.9 trillion in July, as per official data. The bill intends to further amend the Payment and Settlement Systems Act, 2007, the Income-tax Act, 2025, and the Finance Act, 2026. ALSO READ | HT Insight: India’s UPI revolution’s becoming a global export While amendments have been proposed to different parts of the bill, the aim remains the same -- making India a more attractive and predictable place for global capital, manufacturing, and businesses to come to and remain in the nation, news agency PTI reported, citing finance ministry sources.What's key for UPI?
Regarding a policy change in UPI, the main focus among the proposed amendments is the amendment to the Payment and Settlement Systems Act, 2007. The bill seeks to remove the existing legal provision that prevents banks and payment service providers from charging a fee, known as the Merchant Discount Rate (MDR), on notified electronic payments. MDR is a fee that merchants pay to banks and payment service providers for processing digital transactions. Relevant changes have been sought in Section 10A of the Payment and Settlement Systems Act, 2007, and Section 269SU of the Income Tax Act, requiring large businesses with a turnover exceeding ₹50 crore to accept payments via specific electronic modes, including BHIM-UPI QR codes and RuPay debit cards. ALSO READ | Digital India turns 11: UPI becomes world’s largest real-time payment system with 24,000 crore transactions in a year So far, no bank or payment system provider has imposed any charge on anyone, either directly or indirectly, for using the electronic modes of payment prescribed under Section 269SU of the Income Tax Act, 1961. The latest amendment bill, however, proposes to expand the scope of what could be notified under modes of payment that attract no charges. While no charge on UPI payments would be imposed immediately, the bill does give the government the flexibility to introduce MDR at any time. The proposed amendments may result in the Centre setting an MDR fee below 0.5 per cent, which would apply to transactions above ₹2,000, Moneycontrol reported, citing sources. But this charge may be valid for merchants with an annual turnover above ₹1.5 crore. This means that consumers may not have to pay any additional charges, and small businesses may also continue to enjoy the UPI facility free of cost. Another option is that an MDR would be determined based on transactions above a certain limit, Reuters reported. ALSO READ | India’s journey to digital dominance: From Aadhaar to UPI and beyond However, no final decision has been made on the rate or the transactions that would be covered under this amendment.Why was there no fee on UPI payments?
In December 2019, the Centre issued a circular to clarify that, based on Section 10A of the Payment and Settlement Systems Act 2007, no charges, including MDR, shall be applicable on or after January 1, 2020, on the payment made through prescribed electronic modes.The prescribed modes are:
Debit Card powered by RuPay Unified Payments Interface (UPI) (BHIM-UPI) Unified Payments Interface Quick Response Code (UPI QR Code) (BHIM-UPI QR Code) According to a March 2026 report from the Standing Committee on Finance, the objective of zero MDR was to make digital transactions more affordable and widely accessible. ALSO READ | UPI kardo: From mandir to baraat, there’s a QR code for everything in India The committee was told by the Department of Financial Services that the policy aimed to encourage wider acceptance of UPI and RuPay payments, including by smaller businesses. However, it noted that the absence of a fee was making the UPI ecosystem "financially unstable." The committee observed that a structural funding gap was impacting long-term infrastructural investment. The committee observed that while government schemes are necessary to democratise digital payments in Tier 3-6 cities, it urged DFS to explore a self-reliant, tiered revenue model. "The Committee would like to emphasise that establishing a viable revenue mechanism is critical to ensuring the UPI ecosystem achieves financial sustainability without perpetually straining the government exchequer," the report stated. ABOUT THE AUTHOR Asmita Ravi Shankar Asmita Ravi Shankar is a Senior Content Producer at Hindustan Times, based in New Delhi. She covers breaking news and focuses on crime, geopolitics, and the domestic political landscape. She has an eye for the intricacies in criminal investigations and a keen interest in how diplomacy and complexities affect politics, within India and globally. She has written extensively about Operation Sindoor, the Iran-US conflict, elections in India, Trump tariffs and diplomacy. Asmita also engages in multimedia storytelling, using interactive elements to enhance readers' news experience and build a high-traffic news ecosystem. With nearly three years of experience in the journalism industry, Asmita has been with HT for a little over a year. She has previously worked with online news teams at Outlook India and Network18, covering a wide range of beats and building her specialisation. In HT, she has been recognised for her comprehensive reportage and her contribution to coverage of the Bihar assembly election results, having single-handedly driven over 2 million users on that day. Asmita earned a bachelor's degree in journalism from Delhi College of Arts and Commerce, the University of Delhi. She went on to earn a postgraduate diploma in integrated journalism from the Asian College of Journalism, sharpening her skills in multimedia storytelling, editing and sourcing to enrich her reportage. Additionally, Asmita holds a degree in Bharatanatyam from the Pracheen Kala Kendra. She is also a teacher of the Indian classical dance form. When not working on news, Asmita can be found dancing, binge-watching true crime docu-series, cooking and exploring various genres of music.Read More Upi Finance Ministry Finance Minister Rupay Card Get the latest India News, breaking headlines and real-time updates from across the country. Stay informed about politics, government policies, crime, weather and major national developments. Home/India News/Big Change In UPI Policy? Payments Above ₹2,000 May Carry A Fee. What We Know See LessA major policy change might be headed towards the free Unified Payments Interface (UPI), with Finance Minister Nirmala Sitharaman introducing the Taxation and Other Laws (Amendment) Bill, 2026, in the Lok Sabha.
UPI, one of the world's largest real-time payment interfaces, processed 23.6 billion transactions worth ₹29.9 trillion in July, as per official data.
The bill intends to further amend the Payment and Settlement Systems Act, 2007, the Income-tax Act, 2025, and the Finance Act, 2026.
ALSO READ | HT Insight: India’s UPI revolution’s becoming a global export
While amendments have been proposed to different parts of the bill, the aim remains the same -- making India a more attractive and predictable place for global capital, manufacturing, and businesses to come to and remain in the nation, news agency PTI reported, citing finance ministry sources.
The bill seeks to remove the existing legal provision that prevents banks and payment service providers from charging a fee, known as the Merchant Discount Rate (MDR), on notified electronic payments.
MDR is a fee that merchants pay to banks and payment service providers for processing digital transactions.
Relevant changes have been sought in Section 10A of the Payment and Settlement Systems Act, 2007, and Section 269SU of the Income Tax Act, requiring large businesses with a turnover exceeding ₹50 crore to accept payments via specific electronic modes, including BHIM-UPI QR codes and RuPay debit cards.
ALSO READ | Digital India turns 11: UPI becomes world’s largest real-time payment system with 24,000 crore transactions in a year
So far, no bank or payment system provider has imposed any charge on anyone, either directly or indirectly, for using the electronic modes of payment prescribed under Section 269SU of the Income Tax Act, 1961.
The latest amendment bill, however, proposes to expand the scope of what could be notified under modes of payment that attract no charges.
While no charge on UPI payments would be imposed immediately, the bill does give the government the flexibility to introduce MDR at any time.
The proposed amendments may result in the Centre setting an MDR fee below 0.5 per cent, which would apply to transactions above ₹2,000, Moneycontrol reported, citing sources. But this charge may be valid for merchants with an annual turnover above ₹1.5 crore.
This means that consumers may not have to pay any additional charges, and small businesses may also continue to enjoy the UPI facility free of cost.
Another option is that an MDR would be determined based on transactions above a certain limit, Reuters reported.
ALSO READ | India’s journey to digital dominance: From Aadhaar to UPI and beyond
However, no final decision has been made on the rate or the transactions that would be covered under this amendment.
ALSO READ | UPI kardo: From mandir to baraat, there’s a QR code for everything in India
The committee was told by the Department of Financial Services that the policy aimed to encourage wider acceptance of UPI and RuPay payments, including by smaller businesses.
However, it noted that the absence of a fee was making the UPI ecosystem "financially unstable." The committee observed that a structural funding gap was impacting long-term infrastructural investment.
The committee observed that while government schemes are necessary to democratise digital payments in Tier 3-6 cities, it urged DFS to explore a self-reliant, tiered revenue model.
"The Committee would like to emphasise that establishing a viable revenue mechanism is critical to ensuring the UPI ecosystem achieves financial sustainability without perpetually straining the government exchequer," the report stated.
Source: HindustanTimes
Related Posts: upi payments,upi mrd,merchant discount rate,what is mdr in upi payments,bhim upi,rupay card
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