NEW DELHI: The Lok Sabha on Thursday passed a Bill that seeks to ease tax rules to attract investments and remove the existing legal provision that prevents banks and payment service providers from charging Merchant Discount Rate (MDR) on notified electronic payment modes.The Bill — passed without discussion amid din — also proposes to remove the linkage between the Payment and Settlement Systems Act and the I-Tax Act and give legal backing to the government to modify the zero-MDR framework on UPI and RuPay card transactions. Outside the House, however, there was an exchange between FM
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Nirmala Sitharaman and Congress MP Jairam Ramesh. Ramesh said the Bill opens the doors for MDR. The FM responded, saying the charge will apply to merchants and not to users and will help banks and fintech invest in infrastructure and innovation.“More importantly, the UPI and services steering committee headed by NPCI is yet to decide on the MDR. This will happen after Parliament passes the Taxation and Other Laws (Amendment) Bill, 2026… All this could have been discussed on the floor of the House if your party @INCIndia (Congress) engages constructively in Parliament when the Bill was/is tabled,” she said.While leaving person-to-payments outside MDR’s ambit, banks and fintechs may be permitted to charge 0.25% to 0.4% on payments to businesses in excess of Rs 2,000 with an overall ceiling on how much can be charged.Officials have argued that the levy will be lower than what is charged on credit and debit cards, and most merchants will not pass it on to consumers.
