Parliament on Monday passed the Taxation and Other Laws (Amendment) Bill, 2026, with Finance Minister Nirmala Sitharaman making it clear that the legislation does not impose any tax or transaction charge on consumers using the Unified Payments Interface (UPI).

The Bill, which had already been passed by the Lok Sabha, was returned by the Rajya Sabha through a voice vote after a brief discussion and the Finance Minister's reply.

Addressing concerns over the proposed changes, Sitharaman said UPI would continue to be free for consumers.

“Will consumer pay any UPI charge - No. UPI has remained free for consumers since its launch and every Indian will continue to make this instant digital without paying any transaction charge,” she said.

No UPI Transaction Tax

The Finance Minister said the legislation does not introduce a tax on UPI transactions.

At present, consumers generally do not pay a transaction fee when making payments through UPI. The government has also maintained a zero-MDR framework for UPI and RuPay debit card transactions.

The Bill does not change the consumer-facing position announced by the government, Sitharaman said.

However, it gives the Centre greater legal flexibility to determine which electronic payment transactions or payment modes should remain free through government notification.

What the Bill Changes

One of the key provisions seeks to remove the existing linkage between the Payment and Settlement Systems Act and the Income Tax Act.

The legislation also provides legal backing for the government to modify the framework governing merchant discount rate (MDR) for UPI and RuPay transactions.

Under the existing system, banks and payment system providers cannot directly or indirectly charge users for transactions made through UPI and RuPay debit cards.

The new provisions would allow the central government to specify through notification which electronic payment modes or transactions must continue to be provided without charges.

Focus on Digital Payments

The clarification comes amid concerns that changes to the legal framework could eventually lead to charges being imposed on UPI transactions.

Sitharaman's statement specifically addressed consumers, making clear that the Bill does not impose a transaction fee on individuals using UPI.

The government has continued to promote digital payments as an important part of India's financial infrastructure, with UPI becoming one of the country's most widely used payment systems.

Foreign Investment Push

The Taxation and Other Laws (Amendment) Bill also contains provisions aimed at improving India's attractiveness to foreign investors and businesses.

The government has sought to make it easier for Foreign Portfolio Investors (FPIs) to invest in Indian government securities by providing tax-related clarity.

The legislation replaces an ordinance issued on June 5, which provided income-tax exemption on interest income and capital gains earned by FPIs from investments in government securities.

Easier Relocation for Funds

Another provision seeks to simplify the conditions that fund managers must meet when relocating their operations to India.

The changes reduce the number of conditions that certain investment funds need to satisfy to ensure that their global income is not taxed in India.

The government has positioned the measure as part of a broader effort to attract international financial activity and encourage fund managers to establish operations in the country.

Electronics and Data Centres

The Bill also seeks to support India's domestic electronics manufacturing sector and make it easier for foreign cloud service providers to use Indian data centres.

The government has described the proposed measures as providing greater process certainty for businesses operating in these sectors.

The broader objective is to attract foreign capital while strengthening India's position as a manufacturing and digital infrastructure hub.

UPI Remains Free

For ordinary consumers, the key takeaway from the parliamentary debate is that UPI payments will remain free under the legislation.

Sitharaman's assurance came as Parliament completed the legislative process for the Taxation and Other Laws (Amendment) Bill, 2026.

While the legislation gives the government greater flexibility over the regulatory framework for electronic payments, the Finance Minister ruled out any consumer transaction charge on UPI under the Bill.