Pay wall: On a charge on UPI transactions

admin — Fri, 07 Aug 2026 19:39:00 +0000

The government’s decision to allow banks and payment processors to levy a charge on UPI transactions, while still pending, has already led to several policy questions. No official decision has yet been announced, but the preparations are apparent. The only official change that has been made is the amendment to the Payment and Settlements Systems Act that will now allow the government to notify which types of transactions can attract a charge. This was done through the Taxation and Other Laws (Amendment) Bill, 2026, which was passed in the Lok Sabha recently without a debate. Before this law, UPI and RuPay debit card transactions were expressly exempt from any charges. Government sources say that the charge could be allowed only for transactions conducted by large merchants with turnovers of more than ₹1 crore-₹1.5 crore and for transactions above ₹2,000 in value. This would limit the charge to only about 5% of all UPI transactions. However, the amended law gives the government the ability to widen this scope. The fear also is that merchants will pass this cost on to consumers, who will move back to cash, which remains free to use. That said, the issue must also be looked at from the point of view of the payment ecosystem. UPI was made free in 2020. The payments players have argued that they have been bearing the cost of maintaining and running UPI since then. As Reserve Bank of India (RBI) Governor Sanjay Malhotra recently said, “somebody has to pay” for UPI. Presumably, he meant that “somebody” should no longer be the payment processors or banks.

However, the burden of the cost has not solely been borne by these players. Taxpayers are already bearing some of it. In 2021, the government introduced a scheme where it paid these payment processors and banks a subsidy to partially cover the cost of processing transactions up to ₹2,000 done by small merchants. The government has already paid about ₹11,349 crore on this, with another ₹2,000 crore budgeted for 2026-27. The question is whether consumers and merchants should be asked to pay an additional charge when some of their taxes are already being used for this purpose. There is also some anger over the perception that the government pushed people towards UPI through demonetisation, only to now allow it to become chargeable. Finance Minister Nirmala Sitharaman has argued that such a charge will help payment players invest more on infrastructure, innovation, and security. The RBI has the resources to pay for UPI’s development. Using this would entail a small reduction in the vast surplus that it transfers to the Centre each year, but it would save the government from an increasingly unpopular decision.

Published – August 08, 2026 12:20 am IST

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Govt introduces Bill aimed at easing doing business, attracting FDI & enhancing Make in India

admin — Tue, 04 Aug 2026 13:42:00 +0000

Finance Minister Nirmala Sitharaman on Tuesday introduced the Taxation and Other Laws (Amendment) Bill, 2026 in the Lok Sabha, seeking to amend several existing Acts in a bid to attract more foreign capital, make it easier to do business in India, and to push the Make in India mission.

The Taxation and Other Laws (Amendment) Bill, 2026 will amend the Payment and Settlement Systems Act, 2007, Income-tax Act, 2025, and the Finance Act, 2026.

In particular, the main changes have to do with extending existing tax holidays for companies such as Apple that supply machinery and tooling to Indian factories, providing certainty and reducing red tape for foreign fund managers looking to relocate to India, and easing the process for foreign companies to set up data centres in India.

“The proposals in the Bill share a single purpose — to make India a more attractive and predictable place for global capital, manufacturing and business to come and stay,” a source in the Ministry of Finance said on the condition of anonymity because the government must first officially talk about the legislation in Parliament while it is in session.

Electronics and data data centres to gain

Under the Income Tax Act 2025, a foreign company that supplies capital goods, equipment, or tooling equipment to an Indian factory that makes electronics on its behalf does not have to pay income tax on what it is paid for these goods. The time limit for this exemption was set as five years.

The Bill proposes to extend this exemption by another ten years — up to 2040-41. It also clearly defines the electronic goods covered under the provisions such as mobile phones, laptops, personal computers, tablets, servers, wearables, and their key parts and accessories.

It also proposes a key tax exemption for data centres in India.

“Foreign cloud companies that use Indian data centres were earlier promised a tax exemption, but with conditions of clearing several layers of government notification and approval,” the official explained.

The proposed Bill seeks to remove these approval requirements. In addition, it will allow Indian data centres to be run on a leased basis rather than only under direct ownership.

“The result is a much larger and more flexible ecosystem of Indian data centres serving global cloud players,” the official said.

Easing rules for fund managers

“Global investment funds are typically run by skilled fund managers, and India has deep talent in this field,” the official further explained. “Until now, a long and demanding list of conditions discouraged those managers from basing themselves in India, for fear that doing so might make the entire foreign fund taxable here.”

The proposed Bill seeks to slash this list of conditions, retaining only those that are expressly aimed at preventing misuse and roundtripping of money by Indians. Under the proposed rules, fund managers will be allowed to relocate to India without the foreign fund being treated as doing business in India.

“The expectation is that many managers of global funds will move to India, bringing high value activity and jobs with them,” the official said.

Tax benefits for investment trusts

The new Bill also proposes to restore a key tax exemption that had been provided to Real Estate Investment Trusts (REITS) and Infrastructure Investment Trusts (InvITs), but had been withdrawn under the new tax regime.

Dividends paid by REITs and InvITs to their investors were tax free only if the operating company stayed in the old tax regime. However, as companies increasingly move to the new tax regime, investors risked losing this benefit.

The Bill introduced on Tuesday seeks to restore this exemption so that investors continue to receive their dividends tax free even after the operating company shifts to the new regime.

“To keep the change revenue neutral, a modest additional charge is levied at the level of the operating company rather than on the investor,” the official explained. “This protects small investors and gives a further push to investment in real estate and infrastructure.”

Published – August 04, 2026 04:20 pm IST