The Lok Sabha passed on Thursday the Taxation and Other Laws (Amendment) Bill, 2026, which removes the legal wall currently blocking banks and payment companies from levying a merchant discount rate on Unified Payments Interface and RuPay card transactions.
The move could eventually open the door to UPI charges, even as the bill's broader thrust is aimed at making India more attractive to foreign investors.
UPI Payments: What Could Change
Currently, when a customer pays via UPI or swipes a RuPay card, the shopkeeper is not charged anything extra by the bank, a toll that has been waived on UPI since 2020 and is widely credited as a key reason for its rapid growth.
The new bill does not impose a charge today, but it removes the legal bar that prevents banks from doing so in future, should the government choose to notify it.
Shopkeepers could eventually end up paying a small fee to accept UPI payments, costs that experts say often get quietly passed on to customers.
However, according to media reports, only merchants handling big-ticket transactions are expected to be charged, meaning payments to vegetable or tea vendors would remain unaffected.
The Bigger Picture: Attracting Foreign Investment
The larger part of the bill is aimed at making India friendlier to outside investors.
Fund managers based abroad who relocate to India currently face a long list of rules that could make an entire foreign fund taxable in India; the bill trims this list, easing that risk and potentially encouraging more fund managers to move here, which could in turn mean more jobs and greater capital flow through Indian markets.
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Boost For Electronics Manufacturing
Foreign companies supplying machinery to Indian factories making phones, laptops and tablets have had their tax break extended by 10 more years, a move intended to draw more such manufacturers to set up operations in India, with the aim of eventually generating more manufacturing jobs and cheaper devices.
Other Exemptions
The bill also extends tax exemptions to foreign diamond traders and cloud companies operating data centres in India, aimed at pulling in more global business in these sectors.
What Experts Are Saying
Richa Sawhney, partner-tax at Grant Thornton Bharat, told NDTV that the bill signals a calibrated shift from short-term relief to long-term competitiveness.
She said the liberalisation of the fund management regime, incentives for electronics supply chains, facilitation measures for data centres and diamond trading, and tax relief for foreign investors in government securities collectively point towards a policy objective of attracting global capital and business activity into India, adding that the amendments reflect a clear emphasis on investment facilitation, supply-chain resilience and long-term tax certainty.
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