The Centre on Tuesday introduced theTaxation and Other Laws (Amendment) Bill, 2026in the Lok Sabha, proposing changes to thePayment and Settlement Systems Act, 2007that would give the government the flexibility to decide which electronic payment modes remain exempt from merchant charges, including merchant discount rate (MDR). The proposed amendment removes the existing reference to the Income tax Act from provisions related to electronic payment modes and empowers the Central Government to notify one or more electronic payment modes on which banks and payment system providers cannot levy charges. The Bill does not impose MDR on UPI or any other digital payment mode. Instead, it allows the government to decide through future notifications which payment modes will continue to remain free of charges and which may attract charges. The move is likely to revive discussions around the zero MDR regime, a long standing demand from banks and payment companies that have argued the current framework makes it difficult to recover payment processing costs. The development comes more than a year afterEntrackr reportedthat the Finance Ministry and the Reserve Bank of India were considering allowing MDR on UPI transactions for large merchants. The Finance Ministry had denied the report at the time, saying there was no proposal under consideration. According to ANI, the payment related changes are part of the Taxation and Other Laws (Amendment) Bill, 2026, which also proposes amendments to the Income tax Act, 2025 and the Finance Act, 2026, while replacing the Income tax (Amendment) Ordinance, 2026. The Bill also proposes extending tax incentives for electronics manufacturing until March 31, 2041, easing compliance requirements for offshore investment funds, and providing tax exemptions for certain foreign investors and the diamond trade. Bareback Media has recently raised funding from a group of investors. Some of the investors may directly or indirectly be involved in a competing business or might be associated with other companies we might write about. This shall, however, not influence our reporting or coverage in any manner whatsoever. You may find a list of our investorshere.
