THE Lok Sabha on Thursday passed the Taxation and other Laws (Amendment) bill without a debate due to persistent sloganeering by the Opposition over various issues, including alleged theft of donation at the Ram temple in Ayodhya. After the passage of the bill, through which the Government also amended the Payment and Settlement Systems Act, 2007, the House was adjourned for the day. Through the bill the Government seeks to attract more foreign capital, promote domestic electronics manufacturing and make it easier for foreign cloud companies to use Indian data centres by providing “process certainty”. At present, banks and payment-system providers cannot directly or indirectly charge users for payment made through UPI and RuPay debit cards.

 

The bill proposes allowing the Central Government to decide, through notification, which electronic payment modes or transactions must remain free. The Taxation and other Laws (Amendment) bill, 2026, replaces the June 5 ordinance that provided I-T exemption to income from interest income and capital gains made by FPIs from investments in G-Secs. The bill proposes to make it easier for fund managers to relocate to India but cutting down on the list of conditions that these funds will have to satisfy to ensure that their global income does not get taxed in India. To encourage domestic manufacturing by giving policy certainty, the bill extends till 2040-41 the income tax exemption currently available to foreign companies that engage a contract manufacturer in India for producing electronics goods here. Specified electronic items mentioned in Real-time payments made through RTGS and NEFT are done by paying a service charge. However, UPI transactions have been exempted from such charges so far.

 

The proposed changes in Payment and Settlement Systems Act is a part of comprehensive legislation on taxation, which was introduced in the House on Tuesday. The bill was passed through voice vote in the Lok Sabha after the House resumed at 2 pm after the earlier adjournment. As soon as the House re-assembled, Finance Minister Nirmala Sitharaman moved the Taxation and Other Laws (Amendment) Bill, 2026 further to amend the Payment and Settlement Systems Act, 2007 and the Income Tax Act, 2025, and to amend the Finance Act, 2026, to be taken into consideration. “In the Payment and Settlement Systems Act, 2007, in Section 10A, for the words, figures and letters ‘the electronic modes of payment prescribed under section 269SU of the Income-tax Act, 1961’, the words ‘one or more electronic modes of payment as the central Government may, by notification, specify’ shall be substituted with effect from the date of publication of this Act in the Official Gazette,” the bill said.

 

Section 10A of the Payment and Settlement Systems Act, 2007 prohibits banks and system providers from imposing any charges on electronic payments while Section 269SU of the Income Tax Act requires large businesses with a turnover exceeding Rs 50 crore to accept payments through specific electronic modes, including RuPay debit cards and BHIM-UPI QR codes. As on date, no bank or payment system provider could impose any charge upon anyone, either directly or indirectly, for using the electronic modes of payment prescribed under Section 269SU of the Income Tax Act, 1961. Speaking on the issue RBI Governor Sanjay Malhotra on Wednesday said it is “premature” to talk about MDR on payment through digital means. Investment in public infrastructure like payments is necessary, he said, reiterating that someone will have to pay for it.