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Random freezes, missing sound and display glitches usually trace back to one bad driver. Find and replace yours safely.Free scan · under a minuteNo. In India, merchants cannot pass UPI Merchant Discount Rate (MDR) charges on to customers, according to the Department of Financial Services (DFS). The government’s announced MDR framework is due to take effect on 15 October 2026; as of 7 October 2026, it had not yet taken effect. The announced merchant-side charges are not a new fee for customers making UPI payments.
Can a shop add a UPI MDR fee to my bill?
No. The DFS FAQ dated 15 September 2026 states: “No, merchants on-boarded cannot pass on MDR charges to customers while accepting payments through UPI.” The Ministry of Finance has also said banks have been advised to ensure merchants do not pass MDR charges on to customers.
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MDR is a merchant-side payment-processing charge in the acquiring and payment ecosystem. It is not a fee that a merchant may add to a customer’s bill for choosing UPI. The Ministry of Finance says MDR is neither a tax nor a charge collected by the government or NPCI; it is distributed among ecosystem participants. The same release says UPI application providers are prohibited from imposing platform fees or hidden charges.
If a merchant adds a separate UPI surcharge, ask for an itemized bill and clarification from the merchant. The official statement bars passing MDR on to customers; it does not, by itself, establish how every other kind of pricing dispute should be resolved.
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When does the announced MDR framework start?
The DFS FAQ gives 15 October 2026 as the effective date for the finalized framework. Because the date of this article is 7 October 2026, the framework is announced but not yet in effect. Older statements that describe UPI as having no MDR reflect the policy at the time they were issued, not necessarily the rules after the stated start date.
For example, an April 2025 Finance Ministry clarification said no MDR was then charged on UPI transactions and rejected a claim that GST applied to UPI transactions above ₹2,000. A separate March 2025 incentive release covered FY 2024–25. Those dated statements should not be read as overriding the 2026 framework’s later effective date.
What MDR rates are announced for merchants?
The published framework sets different treatment according to transaction type, amount, merchant classification, and sector. These are charges within the merchant payment ecosystem, not customer add-ons.
| Transaction or merchant category | Announced MDR treatment |
|---|---|
| Covered P2M UPI payments above ₹2,000 under the general rule | 0.4% MDR. |
| Covered transactions of ₹75,000 and above under the general rule | 0.4%, subject to a cap of ₹300 per transaction. |
| Specified essential and thin-margin sectors, including railways, telecommunications, insurance, fuel, and agricultural inputs, on transactions above ₹2,000 | ₹5 flat MDR per transaction, as listed in the Ministry of Finance release. |
| Payments relating to mutual funds, securities, stockbrokers, and dealers | 0.02%, capped at ₹300, as listed in the Ministry of Finance release. |
| P2P UPI transactions | Zero MDR under the announced categories. |
| P2M payments up to ₹2,000 | Zero MDR under the announced categories. |
| Small merchants classified under P2PM and receiving up to ₹1 lakh per month through UPI QR codes | Zero MDR on all transactions, according to the Ministry of Finance release. |
Do not assume a merchant’s rate from the bill amount alone. The P2PM treatment depends on the merchant’s account categorization, and sector-specific rates depend on the applicable category definitions. The DFS FAQ sets out further details; the UPI and Services Steering Committee headed by NPCI decides operational parameters, fee-distribution models, and category caps.
Will ordinary consumers be charged for using UPI?
The announced MDR framework does not authorize merchants to transfer MDR to buyers. The Ministry of Finance estimates that approximately 96% of P2M transactions will remain unaffected under the framework; that figure is the government’s estimate, not an independently verified calculation.
For a payment after 15 October 2026, check current publications from the Department of Financial Services, RBI, or NPCI for any updated rules. A merchant’s acquiring arrangement and category can affect the MDR it pays, but that does not change the stated prohibition on passing MDR to customers.
Quick Recap
Official sources
- Department of Financial Services FAQ on MDR for select UPI P2M transactions, dated 15 September 2026.
- Ministry of Finance release on the UPI MDR framework.
- Finance Ministry clarification from April 2025.
- PIB release on the FY 2024–25 UPI incentive scheme.
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