Finance Minister Nirmala Sitharaman has confirmed that UPI transactions will remain free for consumers under the Taxation and Other Laws (Amendment) Bill, 2026. Any future fees will only target high-value merchant transactions, with small businesses exempt. The move balances ecosystem sustainability with consumer protection.
Finance Minister Nirmala Sitharaman addressed the Rajya Sabha on Monday, clarifying that digital payments via the Unified Payment Interface (UPI) will continue to be free for individual consumers. The clarification follows public discussion regarding the Taxation and Other Laws (Amendment) Bill, 2026, which amends the Payment and Settlement Systems Act of 2007.
The government explained that the bill serves as an enabling provision, meaning it provides the legal framework for the government to potentially notify electronic payment rules in the future. It does not automatically impose charges on everyday transactions. The Minister emphasized that the government remains committed to protecting small merchants—such as street vendors, kirana stores, and auto drivers—from any merchant discount rate (MDR) costs.
Sustainability and the UPI Ecosystem
While consumer transactions remain free, the government highlighted the long-term need for a sustainable revenue model to support the UPI infrastructure. Maintaining the system involves significant costs related to cybersecurity, technological resilience, and continuous innovation. In July 2026, UPI processed 2,366 crore transactions with a total value of ₹29.9 lakh crore.
To ensure the ecosystem remains robust, the government is exploring the possibility of nominal fees on a limited category of high-value merchant transactions. This approach aims to align with global payment acceptance practices seen in markets like Brazil, China, and Australia, where transaction fees contribute to infrastructure maintenance. The final scope, structure, and implementation of any such fees will be decided by the UPI and Services Steering Committee once the legislation is enacted.
Wider Impact of the Amendment Bill
Beyond digital payments, the Taxation and Other Laws (Amendment) Bill, 2026, introduces several measures to encourage foreign investment and domestic manufacturing. The bill proposes tax exemptions for foreign companies that supply capital goods and equipment to contract manufacturers in India. This is expected to benefit the electronics manufacturing sector, including the production of laptops, tablets, and servers by companies linked to major global brands.
Additionally, the bill includes provisions to attract investment into artificial intelligence and cloud services by offering tax exemptions for foreign companies procuring data-centre services in India until March 31, 2047. Another segment aimed at boosting the economy is the wholesale diamond trade, where the government is introducing exemptions to encourage firms to shift operations to India, leveraging the country's existing expertise in diamond cutting and polishing.
Investors will now monitor the specific regulatory guidelines issued by the UPI and Services Steering Committee to understand how the future fee structure for high-value merchant transactions will be shaped.