President Droupadi Murmu has granted assent to key amendments regarding taxation laws and the Payment and Settlement Systems Act, aimed at boosting foreign investment and digital payment flexibility.

  • President Droupadi Murmu approved the Taxation and Other Laws (Amendment) Act, 2026.
  • The amendment provides legal backing to modify the zero-MDR framework for UPI and RuPay.
  • Tax exemptions for electronics manufacturing have been extended until 2040-41.
  • New provisions aim to attract more Foreign Portfolio Investors (FPIs) through tax certainty.

In a significant legislative development, President Droupadi Murmu has given her assent to the Taxation and Other Laws (Amendment) Act, 2026, and the amendment to the Payment and Settlement Systems Act, 2007. The Ministry of Law confirmed via a gazette notification that these bills, which were passed by Parliament on August 10, officially received presidential assent on August 17, 2026.

The Taxation and Other Laws (Amendment) Act, 2026, is designed to foster a more investor-friendly environment. By providing 'process certainty,' the government intends to attract more foreign capital and facilitate the use of Indian data centers by global cloud companies. A major highlight is the replacement of the June 5 ordinance, which provided I-T exemptions to FPIs on interest income and capital gains from G-Sec investments.

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Revolutionizing Digital Payments

The amendment to the Payment and Settlement Systems Act, 2007, marks a pivotal shift in India's digital economy. It grants the government the legal authority to modify the existing zero-MDR (Merchant Discount Rate) framework for UPI and RuPay transactions. This means the government can now notify specific electronic payment modes that will remain free from MDR charges.

Currently, banks and payment providers are prohibited from charging users for UPI or RuPay debit card transactions. Under the new framework, the UPI and Services Steering Committee, led by NPCI, will play a decisive role in determining MDR charges.

Finance Minister Nirmala Sitharaman assured that UPI payments will remain free for consumers, with any future MDR applying only to specific merchant categories.

Boosting Domestic Manufacturing

To strengthen the 'Make in India' initiative, the Act extends income tax exemptions for foreign companies engaged in contract manufacturing of electronics goods until 2040-41. This includes critical components for mobile phones, laptops, personal computers, tablets, and servers.

Furthermore, to support the supply chain, the government proposes a 15-year tax exemption for foreign companies that store electronic components in customs warehouses for supply to Indian contract manufacturers. This move is expected to significantly reduce the cost of component sourcing for domestic factories.

Why This Matters

BozokMedia analysis shows that these dual amendments create a synergistic effect: the taxation changes attract the capital, while the payment system updates provide the necessary infrastructure flexibility. This dual approach is crucial for India's goal of becoming a global electronics manufacturing hub.

Historical Background

The evolution of these laws follows a series of moves to stabilize the Indian economy. The transition from the June 5 ordinance to a formal Act provides the long-term legal certainty that global fund managers require to relocate their operations to India without fear of unexpected tax liabilities.

Did You Know?: The Unified Payments Interface (UPI) has become one of the world's most advanced real-time payment systems, revolutionizing how even small vendors conduct business.

Frequently Asked Questions

1. Will there be any extra charge for consumers using UPI?
No, the government has explicitly stated that UPI will remain free for all consumers.

2. Which electronics products are covered under the new tax exemption?
The exemption covers mobile phones, laptops, tablets, servers, and their key accessories.