Parliament Approves Taxation Bill; FM Reassures No MDR on P2P UPI Payments

India's Parliament has advanced The Taxation and Other Laws (Amendment) Bill, 2026, paving the way for potential Merchant Discount Rate (MDR) charges on select Unified Payments Interface (UPI) transactions. The bill, having cleared the Rajya Sabha, now returns to the Lok Sabha for final approval.

Finance Minister Nirmala Sitharaman reiterated that end-users will not face additional charges on UPI transactions. She explained the amendment is an enabling provision allowing the government to specify electronic payment modes that will be protected from charges. The decision on whether to introduce MDR, and its structure, will be determined by the UPI and Services Steering Committee, overseen by the National Payments Corporation of India (NPCI).

Sitharaman emphasized that "no MDR framework has yet been finalised." Previous reports suggested the government was considering a 0.05% to 0.07% MDR on UPI transactions exceeding ₹2,000 for merchants with annual turnover between ₹1 crore and ₹1.5 crore. The finance ministry has since clarified that any introduced MDR would apply only to a limited set of merchant transactions above a specified threshold and at a nominal rate.

Crucially, person-to-person (P2P) UPI transactions are likely to remain exempt from any MDR. While the possibility of MDR on certain merchant transactions exists, it will not impact peer-to-peer transfers. Reserve Bank of India Governor Shaktikanta Das had previously noted discussions on transaction fees were premature but acknowledged a need for cost recovery.