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Passes Taxation Bill, Nirmala Sitharaman Assures UPI Remains Free for Consumers
has cleared the , a comprehensive legislation that tweaks India's electronic payment framework, introduces new tax exemptions, and rationalizes rules for investment funds. Finance Minister Nirmala Sitharaman, responding to concerns in the , firmly assured that UPI transactions will remain free for consumers, even as the bill empowers the government to notify which electronic payment modes are protected from charges.
A Bill Born Out of Global Uncertainty
The Bill, which replaces the
promulgated on
, is rooted in the government's assessment that evolving geopolitical developments and disruptions in international trade and supply chains have created considerable economic uncertainty. The Statement of Objects and Reasons explains that immediate taxation measures are needed to
"mitigate the impact of external economic shocks, ensure stability in the domestic economy, and support key sectors."
The passed the Bill on Tuesday, with the having cleared it earlier, completing the parliamentary process. It now awaits .
The UPI Question: What Actually Changed?
At the heart of public attention is the amendment to
. Previously, the provision barred banks and system providers from imposing charges on payments made through
"
prescribed under
."
The new law replaces this reference with
"one or more
as the
may, by notification, specify."
This shift means the government, rather than statute, will determine which modes remain charge-free. While no charges are imposed by the Bill itself, the flexibility has sparked speculation about a future
(MDR) framework for UPI. Finance Minister Sitharaman was unequivocal in her reassurance:
"UPI transactions would remain free for consumers."
She also clarified that no MDR framework has yet been finalised.
Tax Exemptions and Incentives
Beyond the UPI debate, the Bill makes significant changes to the . Schedule I has been redrawn to rationalise conditions for eligible investment funds and their managers, promoting fund management activity and providing tax certainty. Key changes include a simplified threshold for Indian participation—now capped at 5% of the fund's corpus, with a of four months to rectify excess—and removal of earlier restrictions such as the and .
The Bill also introduces new exemptions in Schedule IV: - Government securities: Interest income and capital gains from government securities are now exempt for and the , subject to prescribed reporting. - Rough diamonds: A 15-year exemption (until tax year 2040-41) for foreign companies engaged in diamond mining or operating as , brokers, aggregators, or tender and auction entities, provided sales occur in notified special zones. - : Foreign companies storing components in warehouses for supply to Indian contract manufacturers of specified electronic goods get a tax break until .
Additionally, the Bill extends the tenure of an existing exemption for electronic manufacturing (Sl. No. 13A) from 2030-31 to 2040-41, and eases conditions for specified data centres, including allowing leased operations by Indian companies.
and
The legislation also amends the to impose a 25% on domestic companies that are (SPVs) if they opt for the new tax regime under Section 200. This complements a change in Schedule V that allows dividend exemption for unit holders of even when the SPV has exercised that option—a move aimed at reducing friction for real estate and infrastructure investment trusts.
Key Observations
From the Bill's Statement of Objects:
"The Bill seeks to achieve the above objectives... having regard to the continuing global developments and the need for a timely and coherent response, it is considered appropriate to incorporate these measures in the present Bill itself."
On the UPI amendment, the memorandum notes:
"No bank or system provider shall impose, whether directly or indirectly, any charge upon a person making or receiving a payment by using one or more
as the
may, by notification, specify."
Finance Minister Sitharaman's assurance in :
"UPI transactions would remain free for consumers."
Looking Ahead
The Bill's passage marks a shift towards a more flexible, notification-driven framework for payment charges, but the government has stressed its commitment to keeping UPI free for end-users. For taxpayers, the expanded exemptions and streamlined fund rules are expected to boost investment in electronics manufacturing, diamond trading, and fund management. Repealing the June Ordinance also ensures continuity of actions already taken under it.
With pending, the law is set to be deemed effective from , aligning with the Income-tax Act's commencement. The full impact of these changes will unfold as the government issues the necessary notifications and rules.
