A clarification that could affect 600 million UPI users landed in Rajya Sabha on Monday, August 10, 2026 — and Union Finance Minister Nirmala Sitharaman made one thing unmistakably clear: the proposed amendment does not impose any new tax or transaction charge on anyone who pays via UPI. Addressing the upper house, Sitharaman stated that the Taxation and Other Laws (Amendment) Bill, 2026 proposes to amend Section 10A of the Payment and Settlement Systems Act, 2007 — and that the provision is strictly 'enabling' in nature. 'It does not impose any tax or transaction charge on UPI users,' she said. What it does is give the government the legal authority to specify, through a future notification, which electronic payment modes will continue to receive statutory protection against charges.

What the 2007 Act's Section 10A actually does

The Payment and Settlement Systems Act, 2007 was India's foundational legislation for regulating payment infrastructure. Section 10A embedded a consumer-protection layer — a statutory shield against transaction fees on specified electronic modes. Successive governments have leaned on this clause to keep low-value digital payments free, most visibly when the central government in December 2019 announced it would absorb Merchant Discount Rate (MDR) costs on UPI and RuPay debit-card transactions for two years to turbocharge digital adoption. The 2026 amendment continues that tradition of flexible, enabling regulation rather than hard-coded mandates.

NPCI's Steering Committee holds the MDR decision

Here is where the story gets consequential. Sitharaman was explicit: once Parliament passes the Bill, it is the UPI and Services Steering Committee — headed by the National Payments Corporation of India (NPCI) — that will 'consider and decide whether any MDR should be introduced and, if so, its scope and structure.' In plain terms, Parliament is not setting a fee. It is handing a carefully bounded decision to a specialist body. 'No MDR framework has yet been finalised,' she said — a sentence worth reading twice before the alarm bells ring. NPCI is the non-profit backbone of India's retail payments stack, operating UPI and a clutch of other systems. Its Steering Committee is the body best positioned to weigh merchant viability, bank economics, and consumer protection in one room. Whether it ultimately recommends any MDR — and at what threshold — is an open question the amendment deliberately leaves unanswered.

Why the distinction between 'enabling' and 'imposing' matters

The Finance Minister's careful language in Rajya Sabha is not semantic hair-splitting. An enabling provision creates a legal pathway; it does not walk down it. The government cannot levy a charge on UPI transactions the moment this Bill passes — it would still need to issue a notification naming the modes to be protected or modified, and NPCI's committee would need to act. That is at least two further steps, each publicly visible and subject to scrutiny. For merchants, banks, and payment service providers who have built business models around zero-MDR UPI, the message is: nothing changes today. The architecture of protection remains intact. What changes is that the legal framework becomes explicitly flexible — and that flexibility, in the hands of NPCI's committee, could one day reshape how India's digital-payments economy is funded. The next milestone to watch: parliamentary passage of the Bill, followed by any government notification or Steering Committee announcement on MDR scope. Until then, every UPI transaction stays exactly as free as the last one.