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9 August 2026

UPI Payment Charges Legislation

The topic concerns a specific legislative amendment regarding the Merchant Discount Rate (MDR) for UPI, which directly relates to government policy on digital payment infrastructure and financial inclusion.

1 min read Day 4 of 9 2 questions 2 prelims

Notes

  • The Taxation and Other Laws (Amendment) Bill, 2026, empowers the government to notify specific UPI transactions that may attract Merchant Discount Rate (MDR) charges.
  • MDR is a fee paid by merchants to banks and payment processors, comprising interchange fees, processing charges, network fees, and GST.
  • Currently, UPI and RuPay debit card transactions are exempt from MDR under the Payment and Settlement Systems Act, 2007, and Section 269SU of the Income Tax Act, 1961.
  • Government subsidies for low-value BHIM-UPI transactions (under ₹2,000) have fluctuated, with ₹2,000 crore budgeted for 2026-27 compared to ₹3,631 crore in 2023-24.
  • Proposed potential MDR structure: 0.25-0.4% charge on transactions exceeding ₹2,000 for merchants with annual turnover above ₹1 crore-1.5 crore.
  • Government rationale: MDR charges are intended to support infrastructure, innovation, and security investments by banks and fintech entities.

Part of a longer story

This is day 4 of 9 in Taxation and Other Laws (Amendment) Bill, 2026, which has been running since 5 August 2026. Reading it whole is usually worth more than reading today alone — the exam asks how something developed.

Questions

  1. Discuss the rationale behind the proposed introduction of Merchant Discount Rate (MDR) on UPI transactions and its potential impact on the digital payment ecosystem in India. 150 words
    Attempt this — 150 words in 8 min
    0 / 150 words 8:00
  2. The sustainability of digital public infrastructure depends on balancing financial inclusion with the operational costs of payment service providers. In light of the proposed amendments to the Payment and Settlement Systems Act, analyze the challenges of transitioning from a zero-MDR regime to a cost-recovery model for UPI. 250 words
    Attempt this — 250 words in 11 min
    0 / 250 words 11:00

Prelims

  1. Which of the following components is NOT typically included in the Merchant Discount Rate (MDR) for electronic payments?

  2. Under the current legal framework, which specific payment methods are explicitly protected from MDR charges by Section 269SU of the Income Tax Act, 1961?

Syllabus

Topics

Sources

250words.in · https://250words.in/daily/2026-08-09/upi-payment-charges-legislation