Indian Government Clarifies No Transaction Fees for UPI Users Despite Amendment

The government on Saturday said consumers and small merchants will continue to use Unified Payments Interface (UPI) services free of charge, seeking to dispel concerns over possible transaction fees following Parliament’s move to amend the Payment and Settlement Systems Act, 2007. The Finance Ministry said any Merchant Discount Rate (MDR), if introduced, would apply only to a limited category of merchant transactions above a specified threshold and would be nominal. "They will apply only to a limited set of merchant transactions, above a certain threshold, at a nominal rate, far lower than debit or credit card MDRs," the ministry said in a statement. The clarification comes two days after the Lok Sabha passed the Taxation and Other Laws (Amendment) Bill, 2026, which seeks to amend the Payment and Settlement Systems Act to enable the government to permit banks and other payment service providers to levy charges on UPI and other notified electronic payment modes. "Once the Parliament passes the Taxation and Other Laws (Amendment) Bill, 2026, which proposes to amend Section 10A of the Payment and Settlement Systems Act, 2007, the 'UPI and Services Steering Committee' headed by NPCI will decide on the MDR, if any," the ministry said. The government said the amendment is an enabling provision aimed at ensuring the long-term sustainability, technological advancement and resilience of UPI, and does not amount to an immediate decision to impose charges on ordinary users. The ministry said UPI’s rapidly increasing transaction volumes require continuous investments in cybersecurity, fraud prevention and digital infrastructure. It also stressed the need for greater competition and a sustainable revenue model to support the next phase of expansion. "Reliance on subsidies alone is not viable for the next wave of growth," it said, adding that a balanced framework was needed to keep UPI "robust, inclusive, and future-ready."