Three Statutes, No Debate: The Taxation and Other Laws (Amendment) Bill, 2026

🗞️ Why in News The Lok Sabha passed the Taxation and Other Laws (Amendment) Bill, 2026 on August 6, 2026 by voice vote, without discussion, amid Opposition sloganeering. The Bill, introduced on August 4, 2026 by the Ministry of Finance, amends three separate statutes: the Income-tax Act, 2025, the Finance Act, 2026, and the Payment and Settlement Systems Act, 2007.

First, What This Bill Actually Is

The Bill’s stated primary purpose is not simply to amend tax law. Its Statement of Objects and Reasons records that, in accordance with sub-clause (a) of clause (2) of Article 123, the Income-tax (Amendment) Ordinance, 2026 is to be replaced by an Act of Parliament.

This matters more than the composite-amendment framing. Article 123 permits the President to promulgate an Ordinance when Parliament is not in session, but Article 123(2)(a) requires that it be laid before both Houses and cease to operate at the expiry of six weeks from reassembly unless replaced. An Ordinance-replacing Bill is therefore the moment at which Parliament either ratifies or refuses executive law-making done in its absence. That is the one category of Bill for which debate is least dispensable, and this one passed by voice vote without any.

The Act is also deemed to have come into force on April 1, 2026, while the substitution in Section 10A of the Payment and Settlement Systems Act operates only from publication in the Gazette.

What a Composite Amendment Bill Is

Beyond the Ordinance limb, the Bill changes several parent statutes through a single instrument. That is a legitimate and common legislative device, used when a coherent policy objective requires touching multiple Acts at once. It is also the device most likely to carry a provision that would attract scrutiny if it stood alone, because the Bill is debated, if at all, on its dominant theme.

Here the dominant theme is taxation. The provision with the widest reach is not a tax provision at all.

The Tax Provisions

Two observations are worth carrying into an answer. First, the direction is not uniformly concessional: the SPV surcharge rises sharply, from 10 to 25 per cent, which cuts against a simple reading of the Bill as a giveaway. Second, the electronics and diamond exemptions run to 2040-41 and 2041 respectively, which is an unusually long horizon for a tax concession and is best read as an industrial-policy signal about supply chains relocating out of China rather than as ordinary tax administration.

The Provision That Reaches Furthest

The amendment to the Payment and Settlement Systems Act, 2007 gives the Central Government statutory backing to modify the zero-MDR framework for UPI and RuPay debit card transactions, and to decide which electronic payment modes remain free of merchant discount rate.

What MDR Is

The Merchant Discount Rate is the fee a merchant pays, as a percentage of the transaction value, to the acquiring bank, which then shares it with the issuing bank, the card network or the payments infrastructure provider. It is the revenue that funds a digital payments system.

Since January 2020, MDR on UPI and RuPay debit card transactions has been zero by statute. The zero-MDR mandate was inserted as Section 10A of the Payment and Settlement Systems Act, 2007, read with Section 269SU of the then Income-tax Act, 1961, which required specified businesses to offer these modes.

Why That Design Created a Problem

Zero MDR made UPI free at the point of use and is the single largest reason for its adoption. It also removed the revenue that pays for the system. Banks and payment service providers carry the cost of switch capacity, fraud management, customer service and settlement, and earn nothing on the largest and fastest-growing share of transactions. The gap has been filled by annual government incentive schemes, which are discretionary, budget-dependent and decided after the fact.

The Bill does not itself end zero MDR. It creates the statutory power to alter the framework by executive decision and to determine which modes stay free. That is the examinable distinction: this is an enabling provision and a delegation of power, not a policy change on the face of the statute.

This connects directly to the proposal to allow MDR on UPI transactions at large merchants, covered in the August 3, 2026 edition. The Bill supplies the legal scaffolding that proposal would need.

The Process Question

The Bill was passed by voice vote without discussion, amid Opposition protest, and it was reported to be one of several Bills cleared the same way during the session.

For UPSC purposes the point is structural rather than partisan. The Indian Parliament has three instruments for scrutinising legislation: debate on the floor, referral to a Departmentally Related Standing Committee, and referral to a Select or Joint Committee. Referral is not mandatory. It is at the discretion of the presiding officer, ordinarily exercised on the government’s advice, which means the majority effectively decides whether it will be scrutinised.

The proportion of Bills referred to committees has fallen sharply: roughly 71 per cent in the 15th Lok Sabha to 16 per cent in the 17th, on PRS figures. Sitting days in the 17th Lok Sabha averaged about 55 a year, across 274 sittings over five years.

The argument to make in an answer is not that voice-vote passage is unlawful. It is that the deliberative function has no procedural guarantee behind it, and that a Bill delegating power over a payments system used by hundreds of millions is precisely the case where the absence of that guarantee shows.

The Counter-Argument Worth Engaging

A serious answer must engage the government’s side. Composite taxation Bills are often technical, and floor debate on the depreciation treatment of leased data centres would add little. Tax certainty has real value: an investor deciding whether to site electronics capital goods supply in India benefits more from a credible fifteen-year horizon than from a debated five-year one. And Parliament retains the power to disallow subordinate legislation, so delegation is not abdication.

The reply is that the delegation here is not technical. Deciding which payment modes carry a fee, and therefore who pays for India’s retail payments infrastructure, is a distributive choice between merchants, banks, platforms and the exchequer. That is a political question, and political questions are what floor debate exists for.

UPSC Relevance

GS Paper 2: Parliament and State legislatures, structure, functioning, conduct of business, powers and privileges; separation of powers; delegation of legislative power and the limits of executive rule-making.

GS Paper 3: Government budgeting; mobilisation of resources; changes in industrial policy and their effects on industrial growth; digital payments infrastructure.

Prelims focus: Article 123 and the six-week rule in Article 123(2)(a); Section 10A of the Payment and Settlement Systems Act, 2007; the three Acts amended; the SPV surcharge change from 10 to 25 per cent; the distinction between a Departmentally Related Standing Committee and a Select Committee.

Mains angle: “A statute that delegates a distributive choice is not a technical statute.” Examine the adequacy of parliamentary scrutiny of financial legislation in India, with reference to committee referral rates and the passage of composite amendment Bills.

📌 Facts Corner, Knowledgepedia

Taxation and Other Laws (Amendment) Bill, 2026:

• Introduced in Lok Sabha: August 4, 2026; passed by Lok Sabha: August 6, 2026, by voice vote without discussion
• Ministry: Finance
• Stated primary purpose: to replace the Income-tax (Amendment) Ordinance, 2026 under Article 123(2)(a)
• The Act is deemed to have come into force on April 1, 2026; the Section 10A substitution operates from Gazette publication
• Amends three Acts: Income-tax Act, 2025; Finance Act, 2026; Payment and Settlement Systems Act, 2007
• FII and Bank for International Settlements exemption on G-sec interest and capital gains, effective April 1, 2026
• Electronics capital goods exemption extended from 2030-31 to 2040-41
• Rough diamond exemption: October 1, 2026 to March 31, 2041
• SPV surcharge under the new regime: raised from 10 per cent to 25 per cent
• Investment fund conditions removed: 25-member minimum, 10 per cent single-investor cap, Rs 100 crore corpus floor, 25 per cent single-entity limit

Merchant Discount Rate (MDR):

• MDR is the fee a merchant pays to the acquiring bank as a percentage of transaction value, shared with issuing bank, network and infrastructure provider
• Zero MDR on UPI and RuPay debit cards since January 2020
• Statutory basis: Section 10A, Payment and Settlement Systems Act, 2007, read with Section 269SU of the Income-tax Act, 1961
• The Bill creates the power to modify zero MDR; it does not itself end zero MDR
• UPI is operated by the National Payments Corporation of India (NPCI), an umbrella organisation set up in 2008 under the aegis of RBI and IBA

Parliamentary Scrutiny:

• Three scrutiny instruments: floor debate, Departmentally Related Standing Committee, Select or Joint Committee
• Committee referral is discretionary, not mandatory
• Referral rate: roughly 71 per cent (15th Lok Sabha) falling to 16 per cent (17th Lok Sabha), on PRS figures
• 17th Lok Sabha sittings: 274 over five years, about 55 a year
• Monsoon Session 2026 opened July 20, 2026

Other Relevant Facts:

• Departmentally Related Standing Committees were introduced in 1993; there are 24, each with 31 members (21 Lok Sabha, 10 Rajya Sabha)
• A Money Bill under Article 110 cannot be referred to a Select Committee of the Rajya Sabha, and the Rajya Sabha has only recommendatory power over it
• The Bank for International Settlements, established 1930 at Basel, is the oldest international financial institution and serves as a bank for central banks

Sources: PRS Legislative Research, PIB, Reserve Bank of India

Source: Three Statutes, No Debate: The Taxation and Other Laws (Amendment) Bill, 2026 — Ujiyari.com | Free UPSC & State PCS Current Affairs