How an August 2026 amendment to Section 10A of the Payment and Settlement Systems Act made the UPI fee legally possible

Charging any fee on UPI was legally impossible until August 2026: Section 10A of the Payment and Settlement Systems Act, 2007 barred banks and system providers from imposing charges on electronic payment modes prescribed under Section 269SU of the Income-tax Act, 1961, and the government instead paid banks incentive subsidies of Rs 1,389 crore in FY22, Rs 2,210 crore in FY23 and Rs 3,631 crore in FY24. In August 2026, the Taxation and Other Laws (Amendment) Bill rewrote Section 10A so that only payment modes the government specifies by notification remain protected, replacing Parliament's blanket protection with an executive list. The government used that power on September 14 to notify UPI payments up to Rs 2,000 and RuPay debit card payments as protected, leaving higher-value UPI payments outside the protection — and the NPCI-led steering committee set the 0.4% MDR for those. Sources: MediaNama, Newstrack (Medianama, English)

• Charging any fee on UPI was legally impossible until August 2026: Section 10A of the Payment and Settlement Systems Act, 2007 barred banks and system providers from imposing charges on electronic payment modes prescribed
• In August 2026, the Taxation and Other Laws (Amendment) Bill rewrote Section 10A so that only payment modes the government specifies by notification remain protected, replacing Parliament's blanket protection with an exe
• The government used that power on September 14 to notify UPI payments up to Rs 2,000 and RuPay debit card payments as protected, leaving higher-value UPI payments outside the protection — and the NPCI-led steering commit