Explained: Will GPay Transactions Soon Be Chargeable In India?

Speculation around whether popular UPI-based apps such as Google Pay, PhonePe and Paytm could soon start charging users has resurfaced after the Lok Sabha passed a bill that alters the legal framework governing digital payments in the country. Here is what the bill actually says, and what it does not.

What has the Lok Sabha passed?

The Lok Sabha on Thursday, passed the Taxation and Other Laws (Amendment) Bill, 2026, which amends the Payment and Settlement Systems Act, 2007, the Income-tax Act, 2025, and the Finance Act, 2026. The bill was moved by Finance Minister Nirmala Sitharaman and was approved by voice vote without discussion amid protests by opposition members over unrelated issues.

The legislation was introduced in the Lok Sabha on August 4, and is aimed at boosting investment, supporting manufacturing, and providing tax certainty, while also replacing the Income-tax (Amendment) Ordinance, 2026. According to the government, the amendments are intended to help mitigate external economic shocks, ensure domestic economic stability, and support sectors affected by prevailing global conditions, while also easing business operations.

The UPI-related change

The provision that has triggered the 'will UPI become chargeable' debate concerns Section 10A of the Payment and Settlement Systems Act, 2007. As things stand, this section bars banks and payment service providers from levying any direct or indirect charge on digital payment modes that are notified under Section 269SU of the Income Tax Act, a list that includes BHIM-UPI QR codes and RuPay debit cards, and which currently applies to businesses with annual turnover above Rs. 50 crore, according to Republic World.

The amended bill removes this blanket restriction. In effect, it gives the Central government legal backing to modify the existing zero-Merchant Discount Rate framework for UPI and RuPay card transactions, and lets it decide which electronic payment modes remain free going forward, per GKToday's summary of the bill.

Put simply, the bill hands the government the power to permit MDR - Merchant Discount Rate, the fee banks and payment processors charge for handling digital transactions - on UPI and other notified payment modes at some point in the future, through a separate notification.

So will GPay or UPI payments cost money now?

Not immediately, and not automatically. Multiple reports citing officials and the text of the bill make clear that the passage of the bill does not mean UPI transactions will become chargeable right away, and that as of now UPI payments will continue under the existing framework. Any actual charge would need a separate government notification specifying the payment modes on which charges may be levied, and until such a notification is issued, users can continue making UPI payments without any change.

The bill removes a legal bar that prevented charging, it does not itself impose a charge. The government has previously and explicitly denied any such plan, the Finance Ministry called reports of an MDR on UPI "completely false, baseless, and misleading," reiterating its commitment to promoting UPI adoption.

What else does the bill cover?

Beyond the payments provision, the Taxation and Other Laws (Amendment) Bill, 2026 folds in a wider set of tax measures. It extends income tax exemptions until 2040-41 for foreign companies that engage contract manufacturers in India for electronics goods, and also covers foreign companies that store components in customs warehouses for supply to Indian manufacturers.

It further exempts Foreign Institutional Investors and the Bank for International Settlements from income tax on interest and capital gains from investments in government securities from April 1, 2026. Separately, the bill proposes a tax exemption until March 31, 2041 for income earned by eligible foreign diamond mining companies, sight holders, brokers, aggregators and auction entities from rough diamond sales through notified special zones, and removes a restriction that had denied tax exemption on dividends received by unit holders of business trusts where the underlying special purpose vehicle had opted for the new tax regime, per ANI.

What happens next?

The bill has cleared only the Lok Sabha so far. It is yet to be tabled and passed in the Rajya Sabha, and will subsequently require the President's assent before it becomes law. Only after enactment - and a specific government notification under the amended framework - could any charge on UPI or other digital payment modes actually take effect. Until then, GPay, PhonePe and other UPI transactions remain free for users, as they have been since 2020.

Published on: Friday, August 07, 2026, 08:27 AM IST