UPI Payment charges are back in the news. The government has announced a merchant discount rate (MDR) on certain UPI merchant payments above ₹2,000, but the start date has changed. The original plan was October 15, 2026. The National Payments Corporation of India (NPCI) has since deferred implementation until immediately after Diwali, with the exact date still to be announced. Person-to-person transfers and most smaller payments are expected to remain free.
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UPI Payment Charges Update: The Start Date Has Moved
Earlier announcements set October 15, 2026 as the start date. The NPCI has since said that MDR on select person-to-merchant (P2M) UPI transactions will be implemented immediately after Diwali, at a date to be notified separately. Until that notice is issued, the existing zero-MDR arrangements remain in place.
Readers should therefore treat October 15 as outdated. The framework itself has not been withdrawn, but the date should be confirmed through official NPCI, RBI or Ministry of Finance announcements.
Will Customers Have to Pay UPI Charges?
Customers are not charged MDR directly. The Ministry of Finance has said the framework applies to specified merchant transactions, not to ordinary transfers between individuals.
The following remain free:
- Person-to-person UPI transfers, regardless of the amount.
- Merchant payments of ₹2,000 or less.
- Payments received by eligible small merchants under the zero-MDR framework.
- Ordinary UPI usage, which has no monthly quota or tiered fee for consumers.
The government has said that around 96% of person-to-merchant transactions will be unaffected.
What Is the Standard MDR for Merchant Payments?
Under the announced framework, a 0.4% MDR applies to specified person-to-merchant UPI payments above ₹2,000. For transactions of ₹75,000 or more, the MDR is capped at ₹300.
| Payment amount | 0.4% MDR | Applicable cap |
|---|---|---|
| ₹3,000 | ₹12 | ₹300 |
| ₹10,000 | ₹40 | ₹300 |
| ₹50,000 | ₹200 | ₹300 |
| ₹75,000 | ₹300 | ₹300 |
| ₹1,00,000 | ₹400 calculated, capped at ₹300 | ₹300 |
The charge is meant to be paid by the merchant to its bank or payment provider, not by the customer.
Which Sectors Will Pay a Flat ₹5 MDR?
Certain essential-service categories follow a separate structure. For eligible payments above ₹2,000, the announced framework sets a flat ₹5 MDR per transaction in sectors including:
- Railways
- Telecommunications
- Insurance
- Fuel and petrol
- Agricultural inputs
Some reports also list utility payments in this category, so check the final notification for the full list.
What About Mutual Funds, Shares and Stockbroker Payments?
Payments connected with capital-market services attract a lower MDR of 0.02%, with a maximum cap of ₹300 per transaction. The category covers mutual funds, securities, stockbrokers, dealers and other eligible investment-related services.
Will Small Merchants Be Affected?
Small merchants receiving up to ₹1 lakh a month through UPI QR codes under the Person-to-Person-Merchant (P2PM) category continue to receive zero-MDR treatment. Banks and payment providers monitor the monthly limit. A merchant whose inward UPI receipts exceed ₹1 lakh for three consecutive months is moved to the regular P2M category.
Eligibility depends on the merchant’s classification, so no merchant should assume the exemption applies automatically.
Will UPI Payments to Friends and Family Remain Free?
Yes. Person-to-person UPI transfers remain free, even above ₹2,000. Sending ₹5,000 to a friend or ₹20,000 to a family member does not attract the new MDR.
Can Merchants Pass the MDR Cost to Customers?
The Ministry of Finance has said that banks should ensure merchants do not pass MDR charges on to customers. UPI application providers are also prohibited from imposing platform fees or hidden charges under the framework.
Merchants may still factor payment costs into their prices, depending on their own margins and commercial decisions.
Why Is UPI Introducing MDR?
The government has said these UPI charges are intended to support the long-term sustainability of UPI. The Ministry of Finance cited a standing committee report that emphasised the need for a viable revenue model for the digital payments ecosystem.
UPI requires continuing investment in cybersecurity, fraud prevention, payment infrastructure, customer support and expansion in rural and semi-urban areas. Under the framework, MDR revenue is shared among banks, payment service providers and UPI application providers, and a dedicated fund equal to 5% of MDR collections is planned to support UPI adoption among small merchants.
Is the Framework Facing a Legal Challenge?
Yes. A public interest litigation was filed in the Supreme Court challenging the decision. On 28 September 2026, the court refused to stay the charges but sought a response from the Centre, the RBI and others.
The court has questioned the legal basis for the charge, in particular whether it is a tax or a government fee, and the basis for the ₹2,000 threshold and the ₹1 lakh merchant limit. The Centre has been asked to file its counter-affidavits within four weeks. The outcome could change the framework, so check for updates.
What Remains Unclear?
Several details of the UPI charges are still open:
- The exact date of implementation, which will be announced after Diwali.
- The final list of sectors eligible for the flat ₹5 MDR.
- How banks and payment providers will display transaction information to customers.
- The outcome of the Supreme Court proceedings.
Use verified announcements from the NPCI, the RBI or the Ministry of Finance rather than forwarded messages or social-media claims.
Frequently Asked Questions
Is UPI becoming chargeable from October 15, 2026? No, not on that date. NPCI has deferred the MDR until immediately after Diwali, with the date to be notified separately. Person-to-person transfers will remain free.
Will I pay ₹300 for every UPI payment above ₹2,000? No. The standard MDR is 0.4%, capped at ₹300 for transactions of ₹75,000 or more. Customers do not pay the MDR directly.
Is the ₹5 charge applicable to all UPI payments? No. The flat ₹5 applies only to specified transactions in categories such as railways, telecom, insurance, fuel and agricultural inputs.
Will sending money to another person attract MDR? No. Person-to-person UPI transfers remain free regardless of the amount.
Will small shops have to pay MDR? Eligible small merchants receiving up to ₹1 lakh a month through qualifying P2PM arrangements keep zero-MDR treatment.
Is MDR a government tax? The Ministry of Finance has said MDR is not a tax and is not collected by the government or NPCI. The Supreme Court has asked the Centre to explain this legal position.
Will UPI apps charge an additional platform fee? Under the framework, UPI application providers are not permitted to impose platform fees or hidden charges on these transactions.
Conclusion
The UPI charges framework is focused on selected merchant payments above ₹2,000, not on everyday transfers. The standard MDR is 0.4% with a ₹300 cap, and certain essential services and capital-market payments follow separate rates.
The start date is no longer October 15, 2026. NPCI has deferred the MDR until immediately after Diwali, and the Supreme Court is still considering a challenge to the framework. Person-to-person transfers, payments up to ₹2,000 and eligible small-merchant transactions remain free.
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