The government has clarified that UPI transactions remain free for consumers following the passage of the Taxation and Other Laws (Amendment) Bill, 2026. While the new law removes the statutory 'Zero MDR' restriction to allow for potential future charges on select merchant transactions, officials confirmed these would not impact ordinary users and are intended to support long-term ecosystem sustainability.
The Indian government has issued a clear statement confirming that Unified Payments Interface (UPI) transactions will continue to be free for ordinary users. This clarification follows the recent passage of the Taxation and Other Laws (Amendment) Bill, 2026, in the Lok Sabha on August 6, 2026, which sparked public debate regarding the future of digital payment costs.
The core of the confusion stemmed from an amendment to Section 10A of the Payment and Settlement Systems Act, 2007. Previously, this law included a statutory 'Zero MDR' mandate, which effectively banned any transaction charges. The new amendment removes this rigid legal restriction. However, this does not mean fees are being implemented immediately. Instead, it provides the government with the legal flexibility to introduce nominal Merchant Discount Rate (MDR) charges for select merchant transactions in the future, if deemed necessary.
Government officials have emphasized that if any MDR structure is introduced later, it would be highly targeted. The charges would not apply to regular consumers making daily payments. Instead, they would apply only to a specific category of merchants and likely only for transactions exceeding a certain monetary threshold. The stated goal is to create a sustainable financial model for the digital payments ecosystem without burdening the general public.
This shift in policy comes as UPI usage continues to reach record levels. In July 2026 alone, the platform processed 23.66 billion transactions totaling approximately ₹29.88 lakh crore. Maintaining this massive scale of operations requires significant, ongoing investment in cybersecurity, fraud prevention, and network infrastructure. The government has argued that relying entirely on government subsidies for these critical services may not be a viable long-term solution as the network expands.
Any decision to introduce specific charges will not be automatic or immediate. Future implementation will be determined by a steering committee, led by the National Payments Corporation of India (NPCI), after the bill is fully enacted. For businesses and market observers, the key monitorable will be the future notifications from the government regarding which specific merchant segments might fall under this new framework and what the transaction thresholds will be. The government has also stated that any potential future charges would be kept at nominal rates, significantly lower than those seen on traditional card payment networks.