On 8 August 2026, the Ministry of Finance clarified that UPI users will continue to make payments without any transaction charges, despite the proposed amendment to Section 10A of the Payment and Settlement Systems Act, 2007 through the Taxation and Other Laws (Amendment) Bill, 2026.
The Government stated that the amendment is intended to support the long-term growth, sustainability and security of India’s digital payments ecosystem.
Key Clarifications and Assurances:
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The Government has reiterated that UPI users will continue to make payments without any transaction charges, and all person-to-person (P2P) transactions will remain free.
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The vast majority of merchant transactions on UPI will also remain free of charge.
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If Merchant Discount Rate (MDR) is introduced in the future, it will apply only to a limited category of merchant transactions above a specified threshold and will not be levied universally across UPI transactions.
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Any future MDR, if introduced, is expected to be nominal and substantially lower than the MDR applicable to debit and credit card transactions.
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The proposed amendment to Section 10A of the Payment and Settlement Systems Act, 2007 is only an enabling provision and does not automatically impose MDR on UPI transactions.
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Once the Taxation and Other Laws (Amendment) Bill, 2026 is enacted, the NPCI-led “UPI and Services Steering Committee” will decide whether MDR is required and, if so, determine its structure.
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The amendment replaces the reference to electronic payment modes prescribed under income-tax provisions with payment modes that may be notified by the Central Government under Section 10A of the Payment and Settlement Systems Act, 2007.
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The Government stated that UPI’s rapid growth requires sustained investment in cybersecurity, fraud prevention, technology upgrades and digital infrastructure.
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According to the Government, the next phase of UPI’s expansion requires a sustainable financial model, as reliance on subsidies alone may not be sufficient in the long run.
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The amendment is aimed at ensuring UPI’s long-term sustainability, increasing competition, supporting service providers and strengthening resilience against emerging risks.
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The Government has rejected reports suggesting that policy changes are being driven by external influences, describing such claims as false and misleading.
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Since its launch in 2016-17, UPI has grown into the world’s largest real-time payment system and has remained free for users and merchants since January 2020.
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In July 2026 alone, UPI processed 2,366 crore transactions worth approximately ₹29.9 lakh crore.
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UPI is currently operational in 11 countries, with several others expressing interest in adopting the platform.
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The Government stated that the next phase of UPI growth will focus on expanding digital payments in rural and semi-urban areas while maintaining affordability, inclusiveness and global competitiveness.