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Customers do not pay UPI charges for sending or receiving money under the Ministry of Finance’s stated framework. Person-to-person transfers remain free at any amount, and merchant purchases up to ₹2,000 carry no MDR or customer UPI charge. For certain larger merchant transactions, the Ministry’s 15 September 2026 release sets out merchant-side MDR rates, with zero MDR for qualifying small merchants and special rates for named sectors.
Who pays UPI charges?
Under the framework described by the Ministry of Finance on 15 September 2026, an individual sending or receiving money through UPI does not pay a transaction, platform, or other UPI charge. The Ministry says banks have been advised to ensure that merchants do not pass MDR on to customers, and that app providers may not impose platform fees or hidden charges under the framework.
MDR, or merchant discount rate, is a charge associated with eligible merchant payments. The Ministry says it is shared among banks, payment service providers, and UPI application providers—not collected by the Government or NPCI. In the Ministry’s words, “MDR is neither a tax nor a charge collected by the Government or NPCI.”
UPI charges by transaction type
| Transaction or merchant category | Stated treatment in the Ministry’s 15 September 2026 release |
|---|---|
| Person-to-person (P2P), any amount | Free to individuals sending and receiving money. |
| Person-to-merchant (P2M) payment up to ₹2,000 | No MDR; the customer does not pay a UPI charge. |
| P2PM-category merchant receiving up to ₹1 lakh per month through UPI QR codes | Zero MDR on all transactions, subject to the category and monthly-receipts conditions. |
| Specified P2M transactions above ₹2,000 | 0.4% MDR, capped at ₹300 for transactions of ₹75,000 and above. |
| Transactions above ₹2,000 in named essential or thin-margin sectors | Flat ₹5 MDR for railways, telecommunications, insurance, fuel, and agricultural inputs. |
| Capital-market payments relating to mutual funds, securities, stockbrokers, and dealers | 0.02% MDR, capped at ₹300. |
These are the rates and categories stated by the Ministry, not a claim that every merchant or every payment route is treated identically. In particular, the ₹2,000 threshold is part of the stated merchant-pricing framework; it is not a general customer UPI transaction limit.
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What the merchant MDR rules mean in practice
Small merchants can qualify for zero MDR
The Ministry says merchants in the P2PM category—including street vendors—who receive up to ₹1 lakh per month through UPI QR codes remain at zero MDR on all transactions. Both conditions matter: the merchant must fall within that category and meet the monthly-receipts condition. The rule should not be read as a blanket statement that every business described informally as a “small shop” always pays zero MDR.
Some larger merchant payments have a stated rate
For specified P2M transactions above ₹2,000, the Ministry lists a 0.4% MDR, with a ₹300 cap for transactions of ₹75,000 or more. It lists a flat ₹5 MDR instead for qualifying payments above ₹2,000 in railways, telecommunications, insurance, fuel, and agricultural inputs. Capital-market payments relating to mutual funds, securities, stockbrokers, and dealers have a separate stated rate of 0.02%, capped at ₹300; that rate is not stated as applying to all financial services.
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The MDR is described as merchant-side, and the Ministry says banks have been advised to prevent it being passed to customers. The rate alone also does not establish a merchant’s total cost under a particular payment provider’s contract; merchants should check their own provider’s pricing terms.
How many merchant payments are affected?
The Ministry estimates that about 96% of P2M transactions will remain unaffected because they are below ₹2,000 or covered by the small-merchant zero-MDR framework. It says about 4% are expected to attract MDR. These are government-reported estimates, not an independent measurement. The release also says P2P transactions account for 70% of total transaction value, placing that value outside the MDR framework described there.
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What changed between the August and September 2026 announcements?
The Ministry’s 8 August 2026 release described a proposed amendment to the Payment and Settlement Systems Act, 2007 as an enabling step. It reaffirmed that consumers would not face transaction charges and that P2P transfers would remain free, while saying the NPCI-headed UPI and Services Steering Committee would decide MDR, if any, after the proposed Taxation and Other Laws (Amendment) Bill, 2026 passed.
The later Ministry release, dated 15 September 2026, gives the specific rates, thresholds, small-merchant conditions, sector exceptions, and customer protections summarized above. As of 4 October 2026, the accessible official releases do not establish the exact date the schedule became operational or identify the operative NPCI circular or order. The rates here are therefore described as the Ministry’s stated framework, not as a date-specific claim about when implementation began.
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What if you pay through a UPI wallet?
NPCI’s UPI FAQ states that a full-KYC prepaid payment instrument (PPI) holder can pay and receive through UPI, and that customers are not charged for PPI-on-UPI transactions or for receiving funds through PPI-on-UPI. That customer-charge statement does not establish the current merchant-side pricing for every wallet-funded route, so it should not be taken to mean all such payments have identical MDR treatment to bank-account-funded payments.
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