MONEY
New Bill in Parliament may bring back MDR on high-value transactions
- IBJ Bureau
- Aug 05, 2026
Union Finance Minister Nirmala Sitharaman has introduced the Taxation and Other Laws (Amendment) Bill, 2026, in the Lok Sabha.
The Bill has proposed a crucial change to Section 10A of the Payment and Settlement Systems Act, 2007, that replaces the blanket zero-charge mandate with a flexible notification-based framework for electronic transaction fees like the Merchant Discount Rate (MDR).
The Bill proposes to scrap the rigid link under Section 10A that ties zero charges to electronic modes prescribed under Section 269SU of the Income Tax Act.
It empowers the Central government to notify directly by official gazette which specific digital payment channels will remain exempt from charges.
The current text of the legislation does not impose an immediate fee, timeline or fixed MDR percentage on UPI or other services.
Peer-to-peer (P2P) and standard user transactions are expected to stay free, with future charges — if notified — targeted conditionally towards large merchants or high-value transfers.
The Bill aligns with the recommendations of parliamentary panels noting that a zero-MDR model requires structural flexibility to help banks and payment operators fund cyber-security and scaling infrastructure.
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