- New 0.4% fee on UPI merchant payments over Rs 2,000.
- Transaction fee capped at Rs 300 for payments for over Rs 75,000.
- Person-to-person UPI transactions remain entirely free for users.
After nearly six years of keeping UPI payments free for merchants, the government on Tuesday introduced a 0.4 per cent transaction fee on merchant payments above Rs 2,000. The fee will be capped at Rs 300 for payments of Rs 75,000 or more. The new charges will come into effect from October 15, 2026.
According to recently released data, UPI transactions crossed Rs 2,982,000,000,000 in August, making it the highest-ever monthly transaction value. Amid this record growth, the issue of introducing charges on UPI payments has come into focus.
The National Payments Corporation of India (NPCI) has introduced a new UPI Merchant Discount Rate (MDR) system. Under the new system, payments of up to Rs 2,000 and payments made to small merchants will remain completely free.
For merchant payments above Rs 2,000, an MDR of 0.4 per cent will apply. Here is a simple guide to the new charges and what they mean for you.
How Much Will You Have to Pay?
- Payments up to Rs 2,000: No charge.
- Payments above Rs 2,000: The merchant will have to pay an MDR of 0.4 per cent. For example, on a Rs 10,000 payment, the charge will be Rs 40.
- Payments of Rs 75,000 or more: The MDR will be limited to a maximum of Rs 300 per transaction.
Will You Have to Pay to Send Money to Friends or Relatives?
No. The new charges do not apply to UPI person-to-person (P2P) payments.
So, if you send money to a friend, family member or another individual through UPI, you will not be directly affected by the new rule.
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Who Will Have to Pay the Extra Charge?
The 0.4 per cent charge applies to merchant payments. This means payments made to shops, businesses or service providers.
For payments above Rs 2,000, the merchant will have to pay the applicable MDR.
What Is MDR and Who Pays It?
MDR stands for Merchant Discount Rate. It is a fee charged to a merchant for accepting digital payments.
Similar charges are already used for some card payments. Under the new UPI system, the charge will apply to eligible merchant transactions above Rs 2,000.
Who Will Be Directly Affected?
The new fee is mainly a charge on merchants, so shopkeepers and businesses will be directly affected. Customers sending money to another person through UPI will not have to pay an additional charge.
For example, if you make a merchant payment of Rs 1 lakh, the MDR will not be Rs 400. Since the maximum charge is capped at Rs 300, the merchant will pay only Rs 300.
How Much Will You Have to Pay for Online Shopping?
Based on the information available so far, no additional charge has been announced for customers making online purchases through UPI.
Similarly, person-to-person UPI payments will remain free.