Lok Sabha Passes Bill Giving Centre Power To Decide Which Digital Payments Are Free Of Merchant Charges
The Lok Sabha on Thursday passed the Taxation and Other Laws (Amendment) Bill, 2026.
The Bill amends the Payment and Settlement Systems Act, 2007, to give the central government the power to decide which digital payment modes, including those currently exempt from merchant charges such as UPI and RuPay debit cards, will continue to enjoy that protection.
At present, Section 10A of the Payment and Settlement Systems Act prohibits banks and payment system providers from levying charges on digital payment modes prescribed under Section 269SU of the Income-tax Act. These prescribed payment modes currently include UPI and RuPay debit cards.
The bill removes this reference to the income tax act. Instead, it empowers the central government to notify the digital payment modes on which banks and payment system providers cannot levy charges. This means the list of protected payment modes will now be decided through a government notification under the Payment and Settlement Systems Act.
The amendment replaces the words "the electronic modes of payment prescribed under section 269SU of the Income-tax Act, 1961" in Section 10A with "one or more electronic modes of payment as the Central Government may, by notification, specify".
The change will take effect from the date the law is published in the Official Gazette.
Section 10A will continue to prohibit banks and payment system providers from imposing, directly or indirectly, any charge on persons making or receiving payments through the notified electronic payment modes. The amendment changes only how those payment modes are identified. Instead of relying on the Income Tax Act, they will be specified directly by the Central Government.
The bill also repeals and replaces the Income-Tax (Amendment) Ordinance, 2026, and introduces additional amendments to the Income-tax Act, 2025 and the Finance Act, 2026