Parliament clears taxation bill, Sitharaman says UPI transactions to remain free for consumers

New Delhi: Parliament on Monday passed the Taxation and other Laws (Amendment) Bill, with Finance Minister Nirmala Sitharaman making clear that the legislation does not impose any tax on UPI and the digital payment system will remain free for consumers.

The Bill, which was passed by the Lok Sabha last week, was returned by the Rajya Sabha with a voice vote after a brief discussion and reply by the Finance Minister.

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The Bill does not propose any tax or transaction charge on UPI, she asserted.

"Will consumer pay any UPI charge - No. UPI has remained free for consumers since its launch and every Indian will continue to make this instant digital without paying any transaction charge," Sitharaman said.

The Bill also proposed to remove the linkage between the Payment and Settlement Systems Act and the Income Tax Act, and provide legal backing to the government to modify the zero-MDR framework of UPI and RuPay card transactions.

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At present, banks and payment system providers cannot directly or indirectly charge users for payments made through UPI and RuPay debit cards. The Bill proposes allowing the central government to decide, through notification, which electronic payment modes or transactions must remain free.

Besides other objectives, through the Bill, the government seeks to attract more foreign capital, promote domestic electronics manufacturing and make it easier for foreign cloud companies to use Indian data centres by providing "process certainty".

The Taxation and other Laws (Amendment) Bill, 2026, replaces the June 5 ordinance that provided I-T exemption to interest income and capital gains made by FPIs from investments in G-Secs.

The Bill also proposes to make it easier for fund managers to relocate to India by cutting down on the list of conditions that these funds will have to satisfy to ensure that their global income does not get taxed in India.

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