Lok Sabha Approves Bill to Allow UPI Charges: Who Will Be Affected?

The Lok Sabha has passed the Taxation and Other Laws (Amendment) Bill, 2026 on 6 August and it modifies the Payment and Settlement Systems Act, 2007. This gives the power to the government so that they can allow banks and other service providers to charge fees on UPI payments and other notified digital payment modes.

This Bill lets the payment companies around India charge fees on UPI transactions in future but only as per the rules set by the government and watched over by the Reserve Bank of India.

This doesn’t mean that UPI charges will start right away. 

Here is everything you need to know about this Bill, why it was introduced and what it simply means for daily UPI users like students, shopkeepers and salaried people.

What is the New UPI Charges Bill?

The Government of India introduced the Taxation and Other Laws (Amendment) Bill, 2026. It was presented by the Finance Minister Nirmala Sitharaman and gained a clearance in the Lok Sabha through a voice vote. 

This removes the old legal rule that stopped banks and payment service providers from charging a Merchant Discount Rate which is known as MDR on UPI and other digital payments. The amendment now replaces the earlier wording Section 10A of the Payment and Settlement Systems Act, 2007 so that the Central government now through a notification can decide which payment methods will be free and which may attract charges.

The RBI will overview how the digital payments work in India, and any new charge will need to follow rules set by the government.

Who Could Be Affected With the New UPI Bill?

Why Was this Bill Introduced?

The government plans to place a small charge on digital payments for consumers and small businesses and build a steady income stream for banks, and payment service providers. 

Running UPI is not free for banks and other app companies since they spend a lot of money on servers, security and customer support for billions of transactions every month. 

That is why this Bill is meant to help these companies so that they can earn a return and keep improving and expanding digital payments across India.

UPI by the Numbers

What Could Change for UPI Users?

If the government notifies charges later then the impact will be different for various types of payments:

• Small-value transactions: Small transactions such as paying for tea or an auto ride, may stay free or might attract a very small fee.

• Large-value transactions: The transactions, especially done by bigger merchants, are more likely to see a fee first.

• Merchant payments: One where you pay a shop or business, are more likely to get charges.

• Peer-to-peer transfers: This involves sending money to family or friends, and are widely expected to remain free since they are not commercial transactions.