Proposed Amendment to PSS Act: Electronic Payment Charges
IN BRIEF
The Taxation and Other Laws (Amendment) Bill, 2026 (“Bill”), introduced in the Lok Sabha as Bill No. 150 of 2026, proposes to amend Section 10A of the Payment and Settlement Systems Act, 2007 (“PSS Act”). The amendment would replace the existing reference to electronic modes prescribed under Section 269SU of the Income-tax Act, 1961 with a power for the Central Government to specify the relevant modes by notification. The Bill does not itself prescribe any MDR or other payment charge.
The Amendment Bill
The existing Section 10A of the PSS Act provides that no bank or system provider may impose, directly or indirectly, any charge on a person making or receiving a payment through the electronic modes prescribed under Section 269SU of the Income-tax Act, 1961.
Section 269SU requires a person carrying on business, whose total sales, turnover or gross receipts exceed ₹50 crore in the immediately preceding previous year, to provide facilities for accepting payment through prescribed electronic modes.
The Bill proposes to amend Section 10A by substituting the existing reference to:
“the electronic modes of payment prescribed under section 269SU of the Income-tax Act, 1961”
with:
“one or more electronic modes of payment as the Central Government may, by notification, specify”.
The stated legislative objective is to remove the reference to the erstwhile Income-tax Act and provide a mechanism under the PSS Act for the Central Government to specify the electronic payment modes to which the prohibition on charges will apply.
Legal effect
The amendment would move Section 10A towards a notification-based framework. Under the existing law, the scope of the no-charge prohibition is linked to the electronic modes prescribed under Section 269SU. Under the proposed provision, the Central Government would determine the relevant modes through notification. The Bill itself does not prescribe any MDR, transaction fee, threshold or charging mechanism. The substantive significance of the amendment is therefore the delegation of the power to determine the scope of the statutory no-charge protection.
The proposed amendment also does not set out substantive criteria governing the modes that may be specified. The eventual notification will accordingly be important in determining the practical scope of Section 10A.
Commencement
As per the Bill, Clause 2, which contains the amendment to Section 10A of the PSS Act, expressly provides that the amendment shall come into force from the date of publication of the Act in the Official Gazette. Accordingly, the proposed amendment to the PSS Act is not given retrospective effect from 1 April 2026. Its operation will commence only upon enactment of the Bill and publication of the resulting legislation in the Official Gazette.
Government Clarification on UPI and MDR
Following introduction of the Bill, the Ministry of Finance, through a Press release dated 8 August 2026, clarified the Government’s position on the implications for UPI. The Ministry has stated that consumers will not face transaction charges, P2P transactions will remain free, and the vast majority of merchant transactions will also remain free. It has stated that, if MDR is subsequently introduced, it would apply only to a limited set of merchant transactions above a specified threshold and at a nominal rate. The Ministry has characterised the amendment as an enabling provision intended, among other things, to support the long-term sustainability of UPI and investment in cybersecurity, fraud prevention and payment infrastructure.
The release further states that, once the Bill is passed, the UPI and Services Steering Committee headed by NPCI will decide on MDR, if any.
These statements represent the Government’s stated policy position and they do not themselves amend Section 10A or establish an MDR framework.
Conclusion
The proposed amendment, hence, does not introduce any UPI charges at this stage. It is an enabling provision that allows the Central Government to determine, by notification, the electronic payment modes to which the no-charge regime will apply. Any future MDR or other charges would require subsequent regulatory action.
