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For consumers, UPI payments remain free in 2026. Person-to-person (P2P) transfers are free at any amount. Person-to-merchant (P2M) payments up to ₹2,000 remain free, and small P2PM merchants receiving up to ₹1 lakh a month through UPI QR codes retain zero merchant discount rate (MDR). A September 2026 Ministry of Finance framework introduces limited MDR inside the merchant ecosystem for some larger or specified-category payments, but banks and payment apps must not pass it to customers as a UPI fee.
The short answer: what you will and will not pay
- Bank-account UPI: Sending or receiving money is free for consumers, whether the transfer is P2P or an eligible merchant payment.
- Wallet or PPI balance: A full-KYC wallet linked to UPI has no customer transaction charge, according to NPCI’s UPI FAQ.
- RuPay Credit Card on UPI: Linking and paying permitted merchants through UPI does not create a UPI transaction fee for the customer. However, your credit-card account can still have interest, late-payment charges, annual fees or other issuer charges.
- MDR: MDR is paid within the merchant-payment ecosystem. It is not a surcharge that a merchant, bank or app may add to your UPI payment.
The ₹2,000 figure is therefore not a consumer fee limit. It is the threshold used in the September 2026 rules to determine when certain merchant-side MDR rates can apply.
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What changed in September 2026?
On 15 September 2026, the Ministry of Finance set out a framework that preserves free consumer use while allowing a limited MDR structure for specified merchant transactions. The framework says MDR applies to about 4% of merchant transactions, while approximately 96% remain unaffected. P2P transactions account for about 70% of total UPI transaction value and remain outside MDR.
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Outbyte PC Repair FREEClear out junk files and repair common Windows errorsFree Scan →Outbyte Driver Updater FREEScan for outdated or missing drivers - takes under a minuteDriver Scan →| Transaction or merchant situation | Rule described in the September 2026 framework | Who bears the charge |
|---|---|---|
| Specified P2M transaction above ₹2,000 | 0.4% MDR, capped at ₹300 for transactions of ₹75,000 and above | Merchant ecosystem, not the customer |
| Railways, telecommunications, insurance, fuel or agricultural inputs above ₹2,000 | Flat ₹5 MDR | Merchant ecosystem, not the customer |
| Mutual funds, securities, stockbrokers and dealers | 0.02% MDR, capped at ₹300 | Merchant ecosystem, not the customer |
| Small P2PM merchant receiving up to ₹1 lakh per month through UPI QR | Zero MDR | No merchant MDR under this exception |
The framework does not authorize a checkout surcharge for the payer. The Ministry states: “No transaction fee, platform fee or other charge may be imposed on individuals for sending or receiving money through UPI.” It also describes MDR as “a charge within the merchant payment ecosystem” rather than a charge on customers.
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Bank-account UPI payments
Person-to-person transfers
A bank-account UPI transfer to another individual remains free at any amount. The transfer can be made by entering a UPI ID, scanning a personal QR code or selecting a contact in your payment app. The amount does not become chargeable merely because it exceeds ₹2,000. P2P transactions are outside the MDR framework.
Payments to merchants
For consumers, P2M payments up to ₹2,000 remain free. Above ₹2,000, a payment may fall into one of the merchant-side MDR categories listed in the 2026 framework, but that does not turn it into a customer fee. Your bank or app should debit only the amount you approved for the purchase.
Small P2PM merchants that receive no more than ₹1 lakh per month through UPI QR codes retain zero MDR. This is a merchant-volume exception; it does not create a new charge for customers who pay those merchants.
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Banks and NPCI set daily or per-transaction limits as security and risk controls. Depending on the payment category and the institution, a general daily limit is commonly between ₹1 lakh and ₹5 lakh. A limit can stop or delay a payment, require additional authentication or require you to use another channel, but it is not a fee threshold. Crossing ₹2,000 does not consume a paid allowance, and reaching a daily limit does not mean the bank may charge for earlier transactions.
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How MDR works without becoming your fee
MDR is the fee flow among parties that process a merchant payment, such as the acquiring bank, issuing bank, payment service provider and app provider. It is accounted for before or during settlement to the merchant. The customer authorizes the purchase amount; MDR is not an extra line item that can lawfully be added as a hidden UPI charge under the stated consumer protections.
Example: a regular specified-category merchant
If a qualifying merchant accepts ₹2,500, a 0.4% MDR would be ₹10 within the merchant ecosystem. You should still pay ₹2,500, not ₹2,510, unless you separately choose a clearly disclosed non-UPI service and its terms. The 0.4% rate is not applied to P2P transfers.
Example: the cap at ₹75,000 and above
At ₹75,000, 0.4% equals ₹300, which is the stated cap. A ₹100,000 transaction would produce ₹400 at an uncapped 0.4% rate, but the framework caps MDR at ₹300 for transactions of ₹75,000 and above. That calculation concerns merchant settlement, not the amount debited from your account.
Example: designated sectors
For an eligible payment above ₹2,000 in railways, telecommunications, insurance, fuel or agricultural inputs, the stated MDR is a flat ₹5 rather than 0.4%. A ₹10,000 fuel payment therefore remains a ₹10,000 customer payment; the ₹5 is an internal merchant-ecosystem charge.
Example: investments and securities
Mutual funds, securities, stockbrokers and dealers use a 0.02% MDR capped at ₹300. On a ₹10,000 transaction, 0.02% is ₹2. The framework still treats that amount as merchant-side MDR, so it is not a separate UPI debit for the investor.
Wallets and other PPI balances
NPCI’s UPI FAQ permits full-KYC prepaid payment instrument (PPI) wallets to be linked to UPI. It answers the customer-fee question directly: “There are no charges to be paid by the customer/PPI holder for UPI transactions.” The same FAQ says customers do not pay charges for receiving UPI transactions from PPIs.
What you can expect
- A UPI payment funded from an eligible full-KYC wallet should not carry a separate customer transaction fee.
- Receiving money through a PPI-linked UPI arrangement should not create a customer charge.
- The wallet’s own rules still matter for matters outside the UPI transaction itself, such as loading methods, cash-out features, limits, inactivity or other disclosed account services.
If a confirmation screen shows a fee, check whether it is actually for a separate wallet service rather than for sending or receiving money through UPI. The official UPI fee statement applies to the UPI transaction; it does not erase every possible charge attached to a separate financial service.
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RuPay Credit Card on UPI
How it works
NPCI allows a RuPay Credit Card to be linked to a UPI ID and used at permitted merchants by scanning a UPI QR code. This is a credit-card transaction routed through UPI, not a bank-account transfer funded by your deposit balance.
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Transactions that are restricted
NPCI’s guidance does not permit the linked credit card for P2P payments, P2PM payments, cash withdrawals at merchants or ATMs, card-to-card payments and several restricted categories. The card is intended for permitted merchant purchases, not for transferring credit directly to another individual or converting the card limit into cash.
Small offline merchant rule
The RuPay operating circular says nil MDR—meaning no interchange, payment-service-provider or app-provider charges—applies to small offline merchants for transactions up to and including ₹2,000. This is a merchant-side rule. It does not mean the credit card account is free of all costs.
| Cost type | Is it a UPI transaction fee? | What to check |
|---|---|---|
| MDR on a permitted merchant payment | No customer fee; it is handled within the merchant ecosystem | The merchant must not add it to your UPI amount |
| Credit-card interest | No; it arises if you carry a balance or otherwise trigger the issuer’s interest terms | Statement due date, interest rate and grace-period conditions |
| Late-payment charge | No; it follows the card issuer’s account terms | Minimum due, payment deadline and penalty schedule |
| Annual or other account fee | No; it is a card-account charge | Issuer’s schedule of charges and any waiver conditions |
| Foreign-exchange or other service charge | No; it is associated with the underlying card or service | Transaction currency, conversion rate and disclosed service terms |
Paying the card bill in full and on time can avoid interest under the issuer’s terms, but that is separate from the fact that the UPI payment itself has no customer MDR charge.
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No. It is a merchant-policy threshold, not a point at which a consumer surcharge starts. Three different ideas are often confused:
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- Consumer price: The amount shown and approved for the purchase.
- Merchant MDR: An internal processing charge that can apply to specified P2M payments above ₹2,000 under the 2026 framework.
- Payment limits: Security controls imposed by a bank or NPCI, often in the ₹1 lakh-to-₹5 lakh daily range depending on category.
A ₹2,001 P2M payment may fall into a merchant MDR category, but you do not owe ₹2,001 plus a UPI fee. A ₹50,000 P2P transfer remains outside MDR altogether. A bank can still decline either payment if it exceeds a risk or daily limit.
What to do if a UPI payment shows an unexpected charge
- Read the confirmation screen before authorizing. Confirm the amount, recipient or merchant name and funding source. A legitimate UPI approval should make the amount you are authorizing clear.
- Save the transaction receipt. Record the date, amount, transaction ID and the exact description of any extra line item.
- Separate UPI from account charges. Check whether the amount is card interest, a late fee, a wallet service, a foreign-exchange conversion or another separately disclosed product charge.
- Ask the merchant to identify the charge. Request a written explanation if the merchant has added a “UPI fee,” “platform fee” or MDR surcharge.
- Raise a complaint with the payment app or bank. Include the transaction ID and screenshot. Ask specifically why a charge was imposed on sending or receiving money through UPI.
- Escalate through the institution’s formal grievance process. Keep the complaint reference number and the response. This creates a record if the matter needs further escalation under the bank or payment provider’s complaint process.
A payment that fails because of a daily limit, risk check or temporary technical issue is not evidence of a fee. Try again only after verifying the beneficiary and checking the bank’s stated limit or service status.
The legal and policy basis
A Lok Sabha answer dated 18 August 2025 recorded that section 10A of the Payment and Settlement Systems Act bars a bank or system provider from imposing charges on a payer or beneficiary using prescribed electronic modes. UPI and RuPay debit cards were notified under section 269SU. The September 2026 framework adds limited merchant-side MDR while preserving free consumer use.
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In practical terms, the legal baseline and the newer MDR framework point in the same direction for an individual: the processing economics may change behind the scenes, but the customer should not be charged a UPI transaction fee for sending or receiving money.
A funding-source checklist
- Using a bank account? P2P is free at any amount. P2M up to ₹2,000 is free, and larger specified merchant payments may involve MDR that must remain merchant-side.
- Using a full-KYC wallet? NPCI says the customer/PPI holder pays no UPI transaction charge, including for receiving UPI transactions from PPIs.
- Using RuPay Credit Card on UPI? Use it only at permitted merchants and remember that credit-card interest, late fees and annual fees remain governed by the issuer’s account terms.
- Seeing a surcharge? Check whether it is a separately disclosed service cost, then challenge any amount described as a fee for sending or receiving UPI money.
Bottom line for payments after October 2026
UPI remains free for consumers after October 2026. P2P transfers stay free at any amount; consumer P2M payments up to ₹2,000 remain free; and small QR merchants up to ₹1 lakh in monthly UPI receipts retain zero MDR. The September 2026 rates apply only inside the merchant ecosystem for specified transactions. Wallet-linked UPI payments have no customer transaction charge, while RuPay Credit Card on UPI adds the normal responsibilities and possible costs of a credit-card account—not a UPI surcharge.
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