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Most UPI users will not pay an extra fee. From 15 October 2026, Taxmann reports that a 0.4% merchant discount rate (MDR) applies to specified person-to-merchant (P2M) payments above ₹2,000. The Ministry of Finance says MDR is a merchant-side charge, not a fee on customers; person-to-person transfers remain free. The Ministry’s release confirms the framework but does not state the 15 October start date, so that date is attributed here to Taxmann.
Will UPI payments above ₹2,000 be charged?
Some merchant payments above ₹2,000 fall under MDR; the threshold does not mean every UPI payment above that amount attracts a customer fee. The Ministry of Finance’s 15 September 2026 release describes the rates and categories. Taxmann reported that the revised MDR starts on 15 October 2026. The Ministry release confirms a 14 September government notification and a 15 September NPCI circular, but the release text does not specify the 15 October date.
MDR is a fee within the merchant payment ecosystem. The Ministry says it is distributed among payment-system participants, including banks and payment application providers, rather than collected by the government or NPCI. The announced framework was introduced under the Payment and Settlement Systems Act, 2007, following UPI Steering Committee deliberations.
Which UPI transactions have MDR?
| Transaction or merchant category | Announced MDR treatment |
|---|---|
| Person-to-person (P2P), any amount | Free under the framework; no transaction, platform, or other charge may be imposed on individuals for sending or receiving money through UPI. |
| P2M payment up to ₹2,000 | Zero MDR. |
| Qualifying small merchant | Zero MDR on all transactions for merchants receiving up to ₹1 lakh per month through UPI QR codes under the stated P2PM small-merchant category. |
| Specified P2M payment above ₹2,000 | 0.4% MDR, capped at ₹300 for transactions of ₹75,000 and above. |
| Specified essential or thin-margin sector above ₹2,000 | Flat ₹5 MDR. The Ministry lists railways, telecommunications, insurance, fuel, and agricultural inputs. |
| Specified capital-market payment | 0.02% MDR, capped at ₹300. The Ministry lists mutual funds, securities, stockbrokers, and dealers. |
The category and eligibility rules matter alongside the amount. A payment to a qualifying small merchant can remain zero-MDR even above ₹2,000; a payment in a listed special sector may use its specific rate rather than the standard 0.4% rate. The Ministry release describes these rates as applying to specified transactions and categories.
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Will I have to pay extra for UPI?
The Ministry says no: MDR is not a UPI customer charge, and banks were advised to ensure merchants do not pass the cost to customers. UPI application providers are prohibited from imposing platform or hidden fees under the announced policy. These are stated safeguards; they do not establish that every merchant’s actual conduct has been independently observed.
The government estimates that approximately 96% of merchant transactions will remain unaffected. That is the Ministry of Finance’s estimate published on 15 September 2026, not a measured post-implementation result.
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Does MDR apply to person-to-person transfers?
No. The Ministry says all P2P UPI transactions remain free regardless of the amount transferred. The MDR framework concerns specified merchant transactions, not transfers between individuals.
Independent reader supportYour contribution helps us test, update, and keep practical guides available for everyone.Are UPI payment limits the same as the ₹2,000 threshold?
No. The ₹2,000 figure is part of the MDR rules for specified merchant payments; it is not a daily UPI transfer limit. The Ministry says daily transaction limits generally range from ₹1 lakh to ₹5 lakh depending on category. Those limits are security and risk-management safeguards and are separate from MDR eligibility.
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Sources and effective-date qualification
- Ministry of Finance via Press Information Bureau, “UPI Continues to Remain Free for Peer to Peer Transactions and 96% of Merchant Transactions,” 15 September 2026: rates, transaction categories, customer safeguards, government estimate, and notification/circular chronology.
- Taxmann Advisory and Research Team, “UPI-Merchant Discount Rate (MDR): Who gets paid and who pays the tax?”, 3 October 2026: reports 15 October 2026 as the start date.
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