Taxation and Other Laws Amendment Act 2026 (Img: Google)
New Delhi: President Droupadi Murmu has given her assent to the Taxation and Other Laws (Amendment) Act, 2026 and amendments to the Payment and Settlement Systems Act, 2007. The bills were passed by Parliament on August 10, 2026.
The amendment to the Payment and Settlement Systems Act provides a legal framework for the government to introduce charges on certain UPI and RuPay card transactions in the future. Through an official notification, the government can decide which electronic payment modes or categories of transactions will remain exempt from the Merchant Discount Rate (MDR).
At present, banks and payment system providers are not allowed to charge users for transactions made through UPI and RuPay debit cards. The decision on MDR-related matters will now involve the UPI and Service Operations Committee, chaired by the National Payments Corporation of India (NPCI).
During the parliamentary discussion, Finance Minister Nirmala Sitharaman clarified that UPI payments would continue to remain free for ordinary users. She said that if MDR charges are introduced in the future, they would apply only to specific categories of business transactions.
The amendment aims to provide a structured mechanism for regulating digital payment charges while maintaining India's push towards a cashless economy.
The Taxation and Other Laws (Amendment) Act, 2026 focuses on attracting foreign capital, strengthening domestic electronics manufacturing, and encouraging foreign cloud service providers to use Indian data centres.
The Act replaces the ordinance issued on June 5, 2026, which provided income tax exemptions on interest income and capital gains earned by Foreign Portfolio Investors (FPIs) from investments in government securities.
The legislation extends income tax exemptions available to foreign companies engaged in contract manufacturing of electronic products in India until the financial year 2040-41.
The benefit covers manufacturing of:
The government expects these measures to strengthen India's electronics manufacturing ecosystem and attract global companies to set up production facilities in the country.
