Fee sword hangs over UPI as Centre proposes legal changes on digital payment charges

The Centre has proposed amendments to the Payment and Settlement Systems (PSS) Act, 2007, that would give it the flexibility to decide which digital payment modes would continue to enjoy exemption from transaction charges, fuelling speculation over the possible return of Merchant Discount Rate (MDR) on select UPI and RuPay debit card transactions.

The proposal, introduced through the Taxation and Other Laws (Amendment) Bill, 2026, tabled in Parliament on Tuesday, seeks to amend Section 10A of the PSS Act. The change would remove the statutory provision that bars banks and payment system providers from levying charges on electronic payment modes notified under Section 269SU of the Income-tax Act.