UPI MDR Bill 2026: What Parliament Actually Passed

Digital Payments & UPI

Search for “lok sabha upi mdr bill” and you’ll find a lot of people asking the same underlying question: did Parliament actually vote to put a 0.4% charge on UPI payments? The honest answer is no, and the confusion is understandable, because the real story runs through three separate government actions spread across six weeks, an Act that set no rate at all, a Gazette notification that also set no rate, and a press release and NPCI circular that finally did. If you’ve read headlines about a “UPI MDR bill” and assumed Parliament fixed the 0.4% figure by vote, this is the piece that untangles what actually happened, step by step, including the part that’s now sitting in front of the Supreme Court.

Quick answer

There is no single “UPI MDR bill” that set a rate. What Parliament passed, on August 6, 2026, was the Taxation and Other Laws (Amendment) Act, 2026, which amended Section 10A of the Payment and Settlement Systems Act, 2007. That amendment didn’t create a charge, it removed a standing legal guarantee that UPI and RuPay debit card transactions must stay free, and replaced it with government discretion to decide which payment modes stay charge-free. The 0.4% figure itself arrived more than five weeks later, on September 15-16, 2026, through a Press Information Bureau release and an NPCI circular, not through any further vote in Parliament or any Gazette notification. That gap between what the law changed and who actually set the number is the basis of a public interest petition now before the Supreme Court.

The misconception: one “bill,” one rate

Because everything happened in the same news cycle, most coverage compresses it into a single event: “Parliament passed a bill allowing UPI charges.” That’s technically true but leaves out the part that actually matters for anyone trying to understand who is accountable for the 0.4% figure. The Act, the Gazette notification, and the rate announcement were three distinct legal instruments, issued by three different mechanisms, on three different dates, and only one of them went through a parliamentary vote. Here’s each one in order.

Step one: the Act Parliament actually passed (August 6, 2026)

Since a January 2020 amendment, Section 10A of the Payment and Settlement Systems Act, 2007 had mandated, by law, that UPI and RuPay debit card person-to-merchant transactions carry zero MDR. It wasn’t a policy choice the government could revisit at will; it was a statutory guarantee. The Taxation and Other Laws (Amendment) Bill, 2026 rewrote that section: instead of the law itself guaranteeing that these modes stay free, it now gives the Central Government discretionary power to notify, from time to time, which payment modes are protected from charges. The amendment set no fee, no percentage, and no threshold. It only changed who gets to decide, moving that decision from the statute itself to the executive.

The Lok Sabha passed the Bill on August 6, 2026 by voice vote, during the Monsoon Session, with the Opposition benches occupied by sloganeering over unrelated issues rather than a substantive debate on the amendment itself. Congress leader Jairam Ramesh was among the few to flag the change publicly, arguing it “removes the statutory guarantee keeping UPI transactions free” and could pave the way for charges later. Finance Minister Nirmala Sitharaman responded that Section 10A’s rewrite was an enabling provision, not an announcement of charges, said the NPCI-led UPI and Services Steering Committee “had not yet taken any decision regarding MDR” at that point, and called opposition alarm over the change “a canard,” adding that these issues “could have been debated during Parliamentary proceedings if the Opposition had constructively participated.”

Step two: a Gazette notification that still set no rate (September 14, 2026)

With the amended Section 10A in force, the Ministry of Finance’s Department of Financial Services used that new discretionary power to issue Gazette Notification S.O. 5067(E) on September 14, 2026. Rather than announcing a charge, the notification did the opposite for a slice of transactions: it explicitly protected RuPay debit cards and UPI transactions up to ₹2,000 from any charge, direct or indirect, going forward. What it conspicuously did not do was name a rate for anything above that threshold. Read on its own, S.O. 5067(E) tells you what stays free; it says nothing about what merchants above ₹2,000 would actually pay.

Step three: the 0.4% figure, from a press release and a committee circular (September 15-16, 2026)

The number everyone was waiting for, 0.4%, capped at ₹300, with sector-specific exemptions, was announced the following day or two through a Press Information Bureau release and a circular from NPCI, acting on behalf of the NPCI-chaired UPI and Services Steering Committee (a body made up of NPCI, banks, and payment service providers). No further Act was passed. No further Gazette notification was issued. The binding commercial rate that roughly six crore merchants now have to account for came from an industry committee’s circular and a government press statement, not from a published, reasoned legal instrument carrying the force of a notified rule.

The three-step chain at a glance

Step	Date	Instrument	Set a rate?
1. Parliament	August 6, 2026	Taxation and Other Laws (Amendment) Act, 2026 (amends Sec. 10A, PSS Act)	No – only grants discretionary power
2. Gazette notification	September 14, 2026	S.O. 5067(E), Dept. of Financial Services	No – protects transactions up to ₹2,000 only
3. Rate announcement	September 15–16, 2026	PIB press release + NPCI circular	Yes – 0.4%, capped at ₹300

The governance criticism: a nationwide charge with no rate in the Gazette

This sequencing is exactly what has drawn legal and governance criticism, separate from the debate over whether a UPI fee is a good idea at all. Commentators, including a detailed piece from The Probe, have pointed out that the figure “0.4 percent is nowhere” in the Gazette notification, only in a press release and an NPCI circular, neither of which carries the same legal status as a notified rule. The broader concern is about delegation: critics argue the amended Section 10A hands the executive open-ended discretion over a nationwide payment charge “with no policy, no formula, no ceiling, no test” written into the law itself, and that the rate took effect without a prior public notice-and-comment period or a further parliamentary review of the specific number.

No rate in the Gazette. S.O. 5067(E) protects transactions up to ₹2,000; it does not mention 0.4% or any other figure for transactions above that line.
Excessive delegation, critics argue. The amended Section 10A gives government discretion over which payment modes stay free without specifying a formula, ceiling, or review mechanism in the statute.
No consultation window. The rate moved from committee circular to nationwide effect on October 15, 2026 without a published draft-and-objection period of the kind used for many other regulatory changes.
Committee-set, not law-set. The binding number came from the NPCI-chaired UPI and Services Steering Committee, an industry body, rather than from Parliament or a Gazette-notified rule.

It’s now before the Supreme Court

On September 16, 2026, Delhi advocate Anjan Datta filed a public interest petition in the Supreme Court, Anjan Datta v. Union of India (W.P.(C) Diary No. 57387/2026), seeking to quash the notification and asking the court to declare that no UPI MDR can be imposed without proper legal authority. Datta’s petition also raises a practical worry: that pushing higher-value UPI payments toward a fee could nudge some transactions back toward cash, with knock-on effects for transparency.

The matter was heard on September 28, 2026 by a three-judge bench led by Chief Justice of India Surya Kant. The Additional Solicitor General, appearing for the Centre, told the court the 0.4% figure is neither a tax nor a fee but a “settlement fee” between payment aggregators and banks, and stressed that “the Government of India was not taking a single rupee” from it. Justice Bagchi reportedly pressed on the constitutional basis for the charge, questioning its “legal incidence.” The bench declined to grant a stay on the October 15 rollout, but issued notice to the concerned parties and directed the Centre to explain the legal and technical basis for the charge on affidavit. The case remains pending, and this article will be updated if the outcome changes anything described here.

The government’s defense

Beyond its position in court, the government’s public defense of the process has rested on three points. First, on substance: Finance Minister Sitharaman has repeatedly said the charge “is not a tax, this is not a cess, and this is not even a surcharge,” and that “the collection is not coming to the Consolidated Fund of India,” meaning the exchequer doesn’t gain from it. Second, on who decided it: she has said the 0.4% figure was arrived at jointly by NPCI, payment banks, and merchant banks in a “completely professional” process, not “imposed by the government,” and dismissed suggestions of behind-the-scenes industry pressure as “absolutely baseless.” Third, on scope: officials have pointed to NPCI’s own estimate that roughly 95-96% of UPI merchant transactions, by volume, fall under the ₹2,000 threshold and are entirely unaffected, framing the change as narrowly targeted rather than a rollback of “free UPI” as a whole.

Critics, including the trader associations and opposition figures covered in our companion piece on the 0.4% framework itself, don’t dispute the legal mechanics so much as the outcome and the process, arguing that a charge affecting an estimated six crore merchants deserved a more transparent, rate-in-the-Gazette rollout regardless of how the number was eventually justified.

This article explains the legislative and legal mechanism behind the UPI MDR change; it is general information, not legal advice, and shouldn’t be relied on as a substitute for reading the actual notification, circular, or court filings, or for professional legal counsel. The Supreme Court matter was pending as of late September 2026 and its outcome could change parts of this framework.

Frequently asked questions

What is the UPI MDR bill?

There isn’t a standalone “UPI MDR bill.” The legislation people mean is the Taxation and Other Laws (Amendment) Act, 2026, which amended Section 10A of the Payment and Settlement Systems Act, 2007 to give the government discretionary power over which payment modes stay free. It did not itself set the 0.4% rate.

Did Parliament pass a UPI MDR bill?

Parliament passed the Taxation and Other Laws (Amendment) Bill, 2026 (the Lok Sabha cleared it on August 6, 2026), which changed the legal framework around UPI charges. It did not vote on or set any specific MDR percentage; that came later through a press release and an NPCI circular.

What is the Taxation and Other Laws (Amendment) Act, 2026?

It’s the Act that amended Section 10A of the Payment and Settlement Systems Act, 2007, changing the law from mandating that UPI and RuPay debit card transactions stay free to giving the Central Government discretion to notify which payment modes remain charge-free. It set no MDR rate itself.

Who decided the 0.4% UPI MDR rate?

The 0.4% rate, along with its ₹300 cap and sector exemptions, was announced through a Press Information Bureau release and an NPCI circular on September 15–16, 2026, following recommendations from the NPCI-chaired UPI and Services Steering Committee, made up of NPCI, banks, and payment service providers. It was not set by Parliament or by a Gazette notification.

Is the UPI MDR rate published in the Gazette?

No. Gazette Notification S.O. 5067(E), issued September 14, 2026, protects UPI transactions up to ₹2,000 and RuPay debit cards from any charge, but it does not mention 0.4% or any other rate for transactions above that threshold. That figure exists only in the PIB release and NPCI circular, which is the basis of a pending Supreme Court challenge.

Has the UPI MDR decision been challenged in court?

Yes. Advocate Anjan Datta filed a public interest petition in the Supreme Court on September 16, 2026 (Anjan Datta v. Union of India, W.P.(C) Diary No. 57387/2026) challenging the legal basis for the charge. A bench led by Chief Justice Surya Kant heard the matter on September 28, 2026, declined to stay the October 15 rollout, and directed the government to file an explanatory affidavit. The case remains pending.

Was the Act debated in Parliament before it passed?

Limited debate took place. The Lok Sabha passed the Bill by voice vote on August 6, 2026 amid Opposition sloganeering over unrelated issues. Congress leader Jairam Ramesh raised concerns about the change afterward, and Finance Minister Sitharaman said a fuller debate could have happened “if the Opposition had constructively participated.”

References

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