3 weeks ago
Taxation Amendment Bill 2026: UPI MDR Return, FDI Incentives Proposed
The Indian government collects money from people and companies through rules called taxes.
A group of elected leaders called the Lok Sabha is now looking at a very big new bill about taxes.
The Finance Minister, Nirmala Sitharaman, introduced the bill on August 4.
One proposed change could let banks charge shops a small fee when customers pay using UPI, a fast phone payment system that currently has no such fee.
The bill also wants to give tax breaks to foreign investors who buy Indian government securities.
It hopes to help companies that make electronics like phones, laptops and tablets by keeping their tax benefits for many years.
Diamond companies and real estate investment trusts would also get tax help under the plan.
Experts say this could be one of the most significant changes to India's taxation laws.
If it passes, the bill will replace an earlier tax ordinance and change several existing laws.
Five other bills were already passed by the Lok Sabha during the current Monsoon Session, and some are waiting for the Rajya Sabha to consider them.
Lok Sabha will take up the Taxation and Other Laws (Amendment) Bill, 2026, introduced by Finance Minister Nirmala Sitharaman on August 4.
The Bill proposes removing the zero Merchant Discount Rate (MDR) provision under Section 10A of the Payment and Settlement Systems Act, which could allow MDR charges on selected digital payments.
It proposes tax exemptions on interest income and capital gains from government securities for Foreign Institutional Investors and the Bank for International Settlements.
Tax exemptions for contract manufacturing of electronic goods may extend to financial year 2041, covering mobile phones, laptops, tablets, servers and wearables.
The Bill also seeks to continue rough diamond sales tax exemptions until March 31, 2041, and ease tax exemption conditions for REITs and InvITs.
- Who
- Finance Minister Nirmala Sitharaman introduced the Bill; the Lok Sabha, India's lower house of Parliament, will consider it.
- What
- The Taxation and Other Laws (Amendment) Bill, 2026, proposing changes to digital payments, taxation, foreign investment and manufacturing.
- Where
- Lok Sabha, the lower house of India's Parliament.
- When
- Introduced on Tuesday, August 4, 2026, and taken up by the Lok Sabha today during the Monsoon Session.
- Why
- To support the next phase of UPI growth, create a revenue stream for the payments ecosystem, attract foreign investment and strengthen domestic manufacturing.
Key facts
- Bill
- Taxation and Other Laws (Amendment) Bill, 2026
- Introduced by
- Finance Minister Nirmala Sitharaman
- Introduced on
- Tuesday, August 4, 2026
- Key proposal
- Removal of zero Merchant Discount Rate (MDR) provision under Section 10A of the Payment and Settlement Systems Act, 2007
- Laws to be amended
- Payment and Settlement Systems Act, 2007; Income-tax Act, 2025; Finance Act, 2027
- Replaces
- Income-tax (Amendment) Ordinance, 2026
- Contract manufacturing tax exemption
- Extended until financial year 2041
- Rough diamond tax exemption
- Extended until March 31, 2041











