The setting can be found by going to iTunes & App Store within the Settings app. From here you can access a menu called Password Settings which contains the toggle to switch on and off the password requirement for free downloads.
Currently, the option is not working but presumably it will be functional when iOS 8.3 is released.
The iOS 8.3 Beta includes improved performance, increased stability, bug fixes, and a redesigned Emoji keyboard. This release also supports additional language and country support for Siri: English (India, New Zealand), Danish (Denmark), Dutch (Netherlands), Portuguese (Brazil), Russian (Russia), Swedish (Sweden), Thai (Thailand), Turkish (turkey). This is beta software that is still in development, which means some applications and services may not work as expected. Follow the instructions below to enroll any iOS devices to receive beta updates.
Apple has opened up a public beta of iOS 8.3 for the first time. More details can be found here.
Please follow iClarified on Twitter, Facebook, Google+, or RSS for updates.