Sitharaman says UPI transactions will remain free for consumers

MUMBAI: No charge, no change. Finance minister Nirmala Sitharaman has assured consumers that Unified Payments Interface (UPI) transactions will remain free, clarifying that the Taxation and Other Laws (Amendment) Bill, 2026 does not impose any tax or transaction charge on UPI payments.

Speaking in the Rajya Sabha on Monday, Sitharaman said consumers would continue to make ordinary low-value UPI payments without paying a transaction fee.

“Will consumers pay any UPI charge? No,” Sitharaman said, adding that UPI has remained free for consumers since its launch and will continue to be so.

Her clarification comes amid concerns that changes proposed under the Bill could pave the way for charges on digital payments.

While consumers will not be charged for regular low-value payments, Sitharaman said a future merchant discount rate (MDR) could potentially apply to a limited category of transactions above a prescribed threshold.

However, no such framework has been decided yet.

Once the legislation is passed by Parliament, the UPI services steering committee headed by the National Payments Corporation of India (NPCI) will consider whether an MDR should be introduced and, if so, determine its scope and structure.

The distinction is important for merchants and payment ecosystem players. MDR is a fee associated with processing digital payments and is generally borne within the merchant-side payments ecosystem rather than being directly charged to consumers.

The government has stressed that small businesses and financial inclusion remain central to its digital payments strategy.

The Rajya Sabha passed the Taxation and Other Laws (Amendment) Bill, 2026, by voice vote on Monday following a brief discussion and Sitharaman’s reply. The Lok Sabha had cleared the legislation last week.

The Bill provides the Centre with legal backing to modify the existing zero-MDR framework governing UPI and RuPay transactions.

It removes the linkage between the Payment and Settlement Systems Act and the Income Tax Act and allows the central government to notify which electronic payment modes or transactions must remain free.

At present, banks and payment system providers cannot directly or indirectly charge users for payments made through UPI and RuPay debit cards.

Sitharaman’s latest clarification follows concerns raised last week after Congress leader Jairam Ramesh questioned whether the proposed changes could lead to a levy on digital payments. The finance minister had subsequently sought to address those concerns on social media.

Sitharaman highlighted the scale of India’s digital payments ecosystem, noting that UPI is now accepted in 11 countries.

In July alone, UPI processed 2,366 crore transactions worth Rs 29.9 lakh crore, underlining the platform’s role in India’s everyday payments infrastructure.

The government is therefore seeking to preserve UPI’s mass-market appeal while retaining the flexibility to modify the commercial framework around digital payments.

The legislation is broader than the proposed changes around UPI and RuPay.

It aims to provide greater tax certainty and attract foreign capital, while also supporting domestic electronics manufacturing through tax incentives available until 2041.

The Bill includes incentives for rough diamond trading and seeks to make it easier for foreign cloud companies to use Indian data centres by providing greater process certainty.

It also replaces the June 5 ordinance that provided income-tax exemption on interest income and capital gains earned by foreign portfolio investors from investments in government securities.

Another provision seeks to simplify the relocation of fund managers to India by reducing the conditions that funds must satisfy to ensure their global income is not taxed in India.

For consumers, however, the immediate takeaway is straightforward: UPI remains free at the point of payment, while any future MDR framework for higher-value transactions will be considered separately.