Consumers making UPI payments will not face any transaction charges, said the Union government on Saturday.

“All person-to-person transactions will continue to be free of charge,” stated the Union Ministry of Finance.

The clarification came two days after the Lok Sabha passed the Taxation and Other Laws Amendment Bill 2026, which would allow banks and other service providers to levy charges on payments through UPI and RuPay debit cards.

The new bill would amend the Payment and Settlement Systems Act 2007 and has led to fears that merchants, who would face a Merchant Discount Rate, would pass off the cost to consumers in the future.

Merchant Discount Rate is a fee charged to businesses by banks to cover the costs of processing transactions. The rate typically ranges from 1% to 3% of the transaction value for credit card payments and can be up to 0.9% for debit card transactions.

The United Payment Interface, or UPI, is a real-time payment system. In July, users made 2,366 crore UPI transactions worth Rs 29.9 lakh crore.

On Wednesday, the finance ministry stated that only a limited set of merchant transactions will attract the Merchant Discount Rate. The charges will apply “above a certain threshold and at a nominal rate”, it added.

The ministry also said that the levy will be much lower than the rates charged on debit and credit card transactions.

After the amendment bill is passed by Parliament, the “UPI and Services Steering Committee headed by the National Payments Corporation of India will decide on the Merchant Discount Rate, if any”, the ministry said.

The government said that the amendment has been introduced to ensure the long-term sustainability of UPI by supporting upgrades in cybersecurity, fraud prevention and digital infrastructure. It is also said that the new bill was aimed at increasing competition by encouraging more companies to expand their operations in the UPI ecosystem.

“Reliance on subsidies alone is not viable for the next wave of growth,” the government said.

The ministry also stated that media reports have been suggesting that external influences may be driving policy changes in India. This was “completely false and misleading”, it added.

Written by Anamika Pathak. Edited by Sneha.

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