For covered standard merchant UPI payments above ₹2,000 and below ₹75,000, the announced MDR is 0.4% of the transaction amount. At ₹75,000 and above, it is capped at ₹300 per transaction. But that is not a blanket charge on every UPI payment: exemptions, merchant category and separate gateway or service fees can change your actual cost. The Department of Financial Services FAQ gives 15 October 2026 as the effective date; this guide reflects policy information current as of 4 October 2026, before that date.
Calculate the MDR for each transaction
For a covered standard person-to-merchant (P2M) payment, apply the rate and cap as follows:
- Up to ₹2,000: zero MDR.
- Above ₹2,000 and below ₹75,000: transaction amount × 0.004 (0.4%).
- ₹75,000 and above: calculate 0.4%, then cap the MDR at ₹300 per transaction.
For example, ₹10,000 × 0.004 = ₹40. A ₹100,000 payment produces ₹400 before the cap, so the MDR is ₹300. The official FAQ also gives ₹3,000 → ₹12 and ₹50,000 → ₹200. These figures apply to covered standard P2M transactions, not every UPI payment. Ministry of Finance announcement; Department of Financial Services FAQ.
Check whether an exemption or special rate applies
P2P and small merchants
Person-to-person (P2P) transfers remain free. Merchant P2M transactions up to ₹2,000 also remain free. The Ministry says qualifying small merchants in the P2PM category—those receiving up to ₹1 lakh per month through UPI QR—continue to have zero MDR on all transactions. For a qualifying P2PM merchant, a payment above ₹2,000 does not alone trigger the standard rate. Check the category assigned by the acquiring bank; do not infer eligibility from one payment. Ministry of Finance announcement; Department of Financial Services FAQ.
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Specified merchant categories
For payments above ₹2,000, the FAQ lists a flat ₹5 MDR per transaction for railways, telecommunications, insurance, fuel and other specified essential or thin-margin sectors. Payments related to mutual funds, securities, stockbrokers and dealers have a 0.02% MDR capped at ₹300. Confirm the acquiring bank’s merchant category and the transaction’s classification before applying either special rate. Department of Financial Services FAQ.
Direct account payments versus credit-linked UPI
The framework described in the FAQ concerns direct user-account-to-merchant-account UPI payments. Credit-linked UPI follows separate credit-product rules, so do not apply these calculations to it without checking the relevant product terms. Department of Financial Services FAQ.
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Separate MDR from gateway and service fees
MDR is the transaction-level charge under the framework. A payment gateway or aggregator may also charge a platform or service fee under its own contract. Those are separate cost lines, and a provider’s advertised rate is not a universal UPI fee or a substitute for your written quote.
| Published example | What the provider page states |
|---|---|
| Razorpay UPI gateway | Standard 2% platform fee; GST applicable; no one-time setup or annual maintenance fee shown on that plan. Razorpay pricing page. |
| Cashfree | Lists 1.95% and displays a time-limited offer for eligible new merchants. Its terms describe platform fees as separate from payment-instrument fees and mutually agreed. Cashfree pricing page. |
Before using a provider’s rate in a forecast, confirm which transaction channel it covers, the fee base, promotion eligibility and end date, settlement timing or charges, refund treatment and applicable taxes. Public pricing pages do not determine negotiated terms for a particular merchant.
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Build a realistic monthly cost estimate
- Classify each payment bucket. Separate P2P from P2M, direct account-funded payments from credit-linked UPI, and standard merchants from P2PM-eligible or special-category merchants.
- Apply the correct MDR rule. Use 0.4% and the ₹300 cap only for covered standard P2M payments. Use the applicable zero-MDR or special-category treatment for the rest.
- Add provider charges separately. Apply the provider’s contracted fee only to the transactions or services it covers. Add other charges and taxes only where confirmed in the contract or current price schedule.
- Sum the buckets. Multiply the number or value of transactions in each bucket by its applicable MDR, then add the relevant gateway and service charges.
- Calculate the blended rate if useful. Divide total UPI acceptance cost by UPI sales volume. Use a representative distribution of ticket sizes: a single headline rate can overstate costs when many payments are exempt or capped.
For a business comparing acceptance routes, assess in-person QR and website or app gateway costs separately. Also compare category eligibility, thresholds and caps, provider fees and offer conditions, settlement terms, and the reporting, refund, reconciliation and integration features the business needs. Existing physical QR stands may continue to be used under the FAQ; a holder can help display a QR in person but does not change MDR or replace a provider-issued QR. Department of Financial Services FAQ.
Keep merchant costs separate from customer pricing
The Ministry of Finance says: “MDR is a charge within the merchant payment ecosystem. It is not a charge on customers making UPI payments.” Its 15 September 2026 release says banks have been advised to ensure merchants do not pass MDR on to customers. Treat the cost as part of the merchant’s acceptance expense, not as a UPI fee to add to a customer’s bill. Ministry of Finance release, 15 September 2026.
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What the 96% estimate means
The Ministry’s 2026 release estimates that 96% of P2M transactions will remain unaffected and says about 4% of merchant transactions will attract MDR under the announced framework. This is the government’s estimate based on its data analysis, not an independently measured result or a forecast of any particular business’s costs. Your bill depends on transaction mix, category classification and provider terms. Ministry of Finance announcement.
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Product prices and availability are accurate as of the date/time indicated and are subject to change. Any price and availability information displayed on Amazon at the time of purchase will apply.
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