UPI Was Free Till Now… But This Lok Sabha Bill Changes The Game

Lok Sabha passes a Bill allowing the government to permit banks and payment providers to charge fees on UPI transactions. Know what the new amendment means for digital payments in India.

Post Published By: Sreeja Chowdhury

Updated : 7 August 2026, 11:49 AM IST

Lok Sabha Passes Bill Allowing Government To Permit Fees On UPI Transactions (Img: Pinterest)

New Delhi: UPI transactions could see a major change as the Lok Sabha has passed a Bill that allows the government to permit banks and payment service providers to levy charges on Unified Payments Interface (UPI) payments and other notified electronic payment modes.

The amendment to the Payment and Settlement Systems Act, 2007 aims to create a sustainable revenue model for banks, payment service providers (PSPs) and digital payment infrastructure companies involved in running India’s rapidly expanding digital payments ecosystem.

Government Gets Power To Allow UPI Charges

The Bill seeks to remove the existing legal restriction that prevents banks and payment providers from charging Merchant Discount Rate (MDR) on certain electronic payment systems, including UPI.

Currently, UPI transactions do not carry MDR charges, allowing customers and merchants to make digital payments without additional fees. The proposed amendment will give the government authority to decide whether charges can be introduced and under what conditions.

Why UPI Charges Are Being Considered

The move comes amid concerns over the rising operational costs of maintaining digital payment infrastructure. Banks, fintech companies and payment service providers have argued that a long-term revenue mechanism is needed to support the expansion, security and maintenance of digital payment networks.

The government has indicated that any potential charges would be structured carefully to avoid impacting small businesses and consumers.

Bill Passed Through Voice Vote

The Bill was passed in the Lok Sabha through a voice vote after Finance Minister Nirmala Sitharaman moved the Taxation and Other Laws (Amendment) Bill, 2026 for consideration.

The legislation includes amendments to the Payment and Settlement Systems Act, 2007, the Income Tax Act, 2025, and the Finance Act, 2026.

UPI’s Future In Focus

UPI has become one of the world’s largest real-time digital payment systems, handling billions of transactions every month. While RTGS and NEFT payments already involve service charges in certain cases, UPI transactions have remained free for users since its widespread adoption.

The latest amendment does not immediately impose charges on UPI payments but creates a legal framework that could allow such fees in the future.