Adding conditions in MERGE statement in Oracle SQL for INSERT/UPDATE

You can simply add WHERE clause to UPDATE. More about it in oracle docs.

So in your case it should look like:

...
WHEN MATCHED
THEN
   UPDATE
   SET   tgt.column3= src.column3,
         tgt.column4 = src.coulmn4
   WHERE tgt.column3 IN (val1, val2) 
WHEN NOT MATCHED
...

Instead Try Doing As below:

MERGE
INTO  target_table tgt
USING source_table src
ON  (src.column1 = tgt.column1)
WHEN MATCHED
THEN
UPDATE
SET   tgt.column3= src.column3,
     tgt.column4 = src.coulmn4  
WHERE src.column1 = tgt.column1 and
     src.column2 = tgt.column2
WHEN NOT MATCHED
THEN
INSERT ( tgt.column1,
     tgt.column2,
     tgt.column3,
     tgt.column4 )
VALUES ( src.coulmn1,
     src.coulmn2,
     src.coulmn3,
     src.coulmn4);