UPI stays free for you — but Parliament just opened the door to merchant charges

Parliament has passed the Taxation and Other Laws (Amendment) Bill, 2026, amending the fixed no-charge protection that UPI has enjoyed under Section 269SU of the Income-tax Act, 1961 and Section 10A of the Payment and Settlement Systems Act, 2007. Finance Minister Nirmala Sitharaman clarified in Parliament that the Bill does not impose any new charge on UPI, and that transactions for ordinary users stay free, per reports from India Legal and Outlook Money.

What actually changed

Until now, the law named UPI specifically as a charge-free payment mode. The amendment removes that fixed reference and instead lets the Central Government notify, by order, which electronic payment modes stay charge-free — giving it flexibility to define the scope going forward instead of it being hard-coded in the Act.

What this opens the door to

Reports point to a possible future Merchant Discount Rate (MDR) framework that would apply only to select merchants:

• Consumers and all person-to-person (P2P) UPI transfers remain free — no charge is proposed for individuals.
• Any MDR is expected to kick in only above a large merchant turnover threshold, with figures ranging from ₹1–1.5 crore to ₹50 crore annual turnover discussed in reports; small kirana and neighbourhood merchants are expected to stay outside its scope.
• The rate under discussion is described as “far lower” than existing card MDR — credit cards typically run 1–3% and debit cards up to about 0.9%.
• Once the law is notified, the UPI and Services Steering Committee (led by NPCI) would decide the final MDR structure, if any is implemented.

Why the government is even considering this

UPI processed over 24,000 crore transactions worth roughly ₹314 lakh crore in FY2025-26, up about 30% in volume and 21% in value year-on-year. The Centre’s incentive scheme to keep UPI free reimbursed banks ₹8,730 crore between FY2021-22 and FY2024-25 — covering only an estimated 11% of the industry’s actual cost of running the free rail.

What this means for you right now

Nothing changes today. There is no new UPI charge in effect, and none has been notified. For salaried users, freelancers, and small business owners:

• Your P2P and everyday UPI payments stay free.
• If you run a business with high UPI turnover, keep an eye on the NPCI steering committee’s decisions once the amendment is formally notified — a merchant-side MDR (if introduced) would be a business cost, not a charge deducted from your bank balance.
• There’s no action needed for retail investors or savers — this is a payments-infrastructure and merchant-economics story, not a change to your bank account or savings.

Source: India Legal, Outlook Money, Drishti IAS, August 2026.