Parliament clears Taxation and Other Laws Amendment Bill; Sitharaman says no UPI MDR for consumers, small merchants
New Delhi, August 10
Parliament on Monday passed the Taxation and Other Laws Bill, 2026, after the Rajya Sabha returned the Money Bill to the Lok Sabha following discussion, with Finance Minister Nirmala Sitharaman assuring that consumers and small merchants will not have to pay Merchant Discount Rate charges on UPI transactions.
The Lok Sabha had earlier passed the Bill. As it is a Money Bill, the Rajya Sabha can only make recommendations on its provisions and return it to the Lok Sabha, which may accept or reject those recommendations.
Replying to the discussion in the Rajya Sabha, Sitharaman said the UPI-related amendment is only an enabling provision and does not itself impose any tax or transaction charge on users.
"The enabling provision that we are bringing in today does not impose any tax or transaction charge on UPI users," Sitharaman said, adding that it enables the government to specify through notification the electronic payment modes that will continue to receive statutory protection against charges.
She also said that no MDR framework has yet been finalised.
"Therefore, no MDR framework has yet been finalised," she said.
Clarifying the position on smaller businesses, Sitharaman said, "Small merchants remain central to UPI's inclusive growth. We are not going to impose any MDR on them. We don't intend to."
She further said consumers would continue to make UPI payments without paying transaction charges.
The Bill also carries a wider set of tax and investment-related changes aimed at improving ease of doing business and attracting investment. These include tax exemptions linked to specified data-centre services in India, incentives for global diamond-trading activity, measures supporting electronics manufacturing and relaxation of conditions for eligible investment funds.
Sitharaman said the reforms are intended to strengthen India's manufacturing ecosystem, attract investment and generate employment.
On data centres, she said the reforms would help expand the domestic ecosystem and stressed that "the investment, the assets, the employment, and also the profit will rest with Indian companies on account of data centre reforms."
The Bill also provides tax exemptions for certain foreign institutional investors and the Bank for International Settlements on income from investments in government securities, while introducing other changes related to rough-diamond trading and business trusts.
As a Money Bill, the Rajya Sabha can recommend amendments but cannot block it; the Lok Sabha may accept or reject those recommendations.
— ANI
Reader Comments
Finally some clarity! UPI has become the backbone of daily transactions in our country. The assurance that MDR won't be imposed on small merchants is very reassuring. But I hope the government also focuses on ensuring the banks don't find other ways to charge indirectly.
Interesting to see how India balances digital innovation with tax policy. The data centre incentives could be a game-changer for attracting global investment. Good to see the government thinking long-term about manufacturing and employment.
Sitharaman ji has handled this well. But let's be honest, the MDR waiver is only an enabling provision - the real test will be when they actually notify the framework. Our small merchants need protection, and I hope the government sticks to its word. Also, why is the Rajya Sabha just a spectator in Money Bills? 🤔
As someone who follows global tax policies, the data centre and diamond trading exemptions are smart moves to attract foreign investment while building domestic capability. Would be interesting to see how these play out in the long run.
The assurance about UPI MDR is welcome but I wish the government had brought this clarification before the Bill was passed. The way Money Bills work, the Rajya Sabha's role seems more ceremonial than substantive. Still, if small merchants and consumers are protected, that's a positive step for Digital India. 🇮🇳
Statement says "no MDR framework has yet been finalised" - that's a bit concerning. Why pass a law without clarity on implementation? Our kirana stores and chaiwalas use UPI daily, they
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