Lok Sabha Approves Key Amendment to Payment and Settlement Systems Act

The Lok Sabha has passed a crucial amendment to the 'Payment and Settlement Systems Act, 2007' on Thursday. This amendment grants the central government the authority to impose charges on banks and payment service providers for Unified Payments Interface (UPI) transactions and other specified digital payment methods. While no charges will be implemented immediately, this change removes the legal barrier that previously prevented banks from collecting Merchant Discount Rates (MDR) on such transactions.

Additionally, the Lok Sabha approved the 'Taxation and Other Laws (Amendment) Bill, 2026' through a voice vote. Following a brief suspension of the session, proceedings resumed at 2 PM, and the bill was passed without any discussion amidst disruptions. Finance Minister Nirmala Sitharaman introduced this bill, which aims to amend the 'Payment and Settlement Systems Act, 2007', the 'Income Tax Act, 2025', and the 'Finance Act, 2026'.

This amendment replaces the existing provisions under Section 10A of the 'Payment and Settlement Systems Act'. The bill states: "In Section 10A of the 'Payment and Settlement Systems Act, 2007', the words 'methods of electronic payment as specified under Section 269SU of the Income Tax Act, 1961' will be replaced with 'one or more methods of electronic payment as notified by the central government'. This change will take effect from the date of publication of this Act in the official gazette." In simpler terms, this amendment legally empowers the central government to determine which electronic payment methods may incur charges in the future.

The passage of this bill does not mean that charges will automatically apply to UPI transactions. Instead, it provides the government with the authority to allow banks and payment service providers to impose charges through future notifications. Until such notifications are issued, UPI transactions will continue to operate under the existing system.

Currently, Section 10A of the Payment and Settlement Systems Act prevents banks and payment service providers from imposing any direct or indirect charges on electronic payment methods covered under Section 269SU of the Income Tax Act. According to Section 269SU, businesses with an annual turnover exceeding ₹50 crore are required to offer customers specific digital payment options, including BHIM-UPI QR codes and RuPay debit cards. This legal provision has hindered banks and payment service providers from applying Merchant Discount Rates (MDR) on notified electronic payment methods. The amendment will eliminate this legal restriction, granting the government greater flexibility in shaping future policies.

For the latest updates on national politics, current events, and major news stories, stay tuned to National News in Hindi.