Lok Sabha passes Taxation and Other Laws (Amendment) Bill without discussion
The Lok Sabha passed the Taxation and Other Laws (Amendment) Bill, 2026 by voice vote, without discussion
The Bill amends the Payment and Settlement Systems Act, 2007, the Income-tax Act, 2025, and the Finance Act, 2027, and replaces an earlier Income-tax (Amendment) Ordinance, 2026
The key amendment substitutes Section 10A of the Payment and Settlement Systems Act, 2007, removing the fixed reference to electronic payment modes notified under the Income-tax Act and instead empowering the Central Government to specify, by future notification, which modes may attract a Merchant Discount Rate (MDR)
The change does not itself impose any charge on UPI transactions; it removes the statutory bar so that a future government notification could permit MDR on specified digital payment modes
Any decision on the actual MDR structure for UPI would follow separately, including inputs from the NPCI-headed UPI and Services Steering Committee
Money Bill Procedure — Article 110 and Passage Without Discussion
A Bill dealing wholly with taxation, borrowing, or the Consolidated Fund is classified as a Money Bill under Article 110 of the Constitution, which follows a distinct — and faster — legislative route than an ordinary Bill.
Key Details
- Article 110(1) lists the specific matters (imposition/abolition/regulation of tax, borrowing, custody of the Consolidated Fund/Contingency Fund, appropriation, declaring expenditure charged on the Consolidated Fund, or any matter incidental to these) that qualify a Bill as a Money Bill
- Under Article 110(3), if a question arises whether a Bill is a Money Bill, the decision of the Speaker of the Lok Sabha is final
- A Money Bill can only be introduced in the Lok Sabha (Article 109) and requires only a simple majority of members present and voting for passage — not a special majority
- The Rajya Sabha cannot amend or reject a Money Bill; it may only recommend changes within 14 days, which the Lok Sabha is free to accept or reject (Article 109); if the Rajya Sabha does not act within 14 days, the Bill is deemed passed by both Houses
- Passage "without discussion" is procedurally permissible via voice vote if no member presses for debate; this does not affect the Bill's validity, though it draws attention when a Bill amends significant public-facing regulation
The report notes the Bill's passage by voice vote without debate, illustrating how tax/financial legislation can move through the Lok Sabha quickly under Money Bill-type procedure, with the Rajya Sabha's role being only recommendatory.
Payment and Settlement Systems Act, 2007 and the Zero-MDR Mandate
The Payment and Settlement Systems Act, 2007 is the principal law regulating payment systems in India, administered by the Reserve Bank of India, under which Section 10A currently bars charging Merchant Discount Rate on specified digital payment modes.
Key Details
- The Payment and Settlement Systems Act, 2007 designates the RBI as the regulator and supervisor of payment systems including UPI, RTGS, NEFT, IMPS, and card networks
- Section 10A, inserted via the Finance Act, 2020, prohibited banks and payment service providers from imposing MDR on transactions made through electronic modes prescribed under Section 269SU of the Income-tax Act, 1961 — a category that came to include UPI and RuPay debit cards
- This "zero-MDR" mandate has been in force since January 2020, intended to promote adoption of digital payments by keeping them free for merchants and customers
- The 2026 amendment does not itself repeal zero-MDR; it changes the statutory anchor from a fixed Income-tax Act cross-reference to Central Government notification power, giving the executive flexibility to prescribe MDR-liable payment modes without further legislative amendment
The Bill is the specific legislative vehicle that alters Section 10A, shifting authority over the zero-MDR policy from a fixed statutory rule tied to Income-tax Act notifications to executive discretion via future government notification.
Ordinance-Making Power — Article 123
The Bill also replaces an Income-tax (Amendment) Ordinance, 2026, illustrating the constitutional requirement that ordinances promulgated by the President must be placed before Parliament and converted into Acts (or lapse).
Key Details
- Article 123 empowers the President to promulgate ordinances when Parliament is not in session and immediate action is required; such ordinances have the same force as an Act of Parliament
- An ordinance must be laid before both Houses of Parliament when they reassemble and ceases to operate six weeks from reassembly unless a resolution disapproving it is passed earlier, or unless replaced by an Act
- Passing a formal amendment Bill covering the same subject matter is the standard route by which the government regularises an ordinance's provisions into permanent law
- The D.C. Wadhwa v. State of Bihar (1987) case held that repeated re-promulgation of ordinances without placing them before the legislature is a fraud on the Constitution, reinforcing why ordinances must ultimately be converted into Acts
The Bill formally supersedes the Income-tax (Amendment) Ordinance, 2026, an instance of the constitutionally mandated process of converting an ordinance into a parliamentary Act.
- Bill introduced in Lok Sabha: August 4, 2026, by the Finance Minister; passed by voice vote without discussion on August 6, 2026
- Statutes amended: Payment and Settlement Systems Act, 2007 (Section 10A); Income-tax Act, 2025; Finance Act, 2027
- Zero-MDR mandate in force since January 2020 (Section 10A, inserted via Finance Act, 2020), tied to Section 269SU, Income-tax Act, 1961
- Money Bills require only a simple majority in Lok Sabha (Article 110); Rajya Sabha has 14 days to recommend changes, which are non-binding
- Ordinances under Article 123 lapse six weeks after Parliament reassembles unless converted into an Act
- Any actual MDR rate/structure decision on UPI would require a separate Central Government notification, following review by the NPCI-led steering committee