For individuals, UPI remains free for sending and receiving money. Under the Ministry of Finance’s 15 September 2026 statement, customers also pay no UPI charge on merchant payments up to ₹2,000. Certain merchant payments above ₹2,000 may carry a merchant-side fee called MDR, but the stated framework says banks should prevent merchants from passing it on to customers.
Who pays UPI charges?
The answer depends on whether the payment is between people or made to a merchant. The Ministry of Finance’s 15 September 2026 release says individuals pay no transaction, platform or other charge for sending or receiving money through UPI. It also says person-to-person (P2P) transfers remain free regardless of amount. Read the Ministry’s release on UPI charges.
For merchant payments, the customer’s charge and the merchant’s MDR are different things. MDR is a merchant-side charge distributed among payment ecosystem participants; it is not a fee the Ministry says should be added to a customer’s bill. The Ministry says banks have been advised to ensure merchants do not pass MDR to customers, and that app providers are prohibited from imposing platform fees or hidden charges under the described framework.
UPI charge and MDR rules by transaction
| Payment or merchant category | Stated treatment |
|---|---|
| P2P transfer, any amount | No charge to the individual sending or receiving money. |
| Merchant payment (P2M) up to ₹2,000 | No MDR; the customer does not pay a UPI charge. |
| P2PM merchant receiving up to ₹1 lakh per month through UPI QR | Zero MDR on all transactions. The monthly receipts, UPI QR and P2PM-category conditions apply. |
| Specified P2M payment above ₹2,000 | 0.4% MDR, capped at ₹300 for transactions of ₹75,000 and above. This is a merchant-side charge. |
| Payment above ₹2,000 in a listed essential or thin-margin sector | Flat ₹5 MDR for railways, telecommunications, insurance, fuel and agricultural inputs. |
| Capital-market payment for mutual funds, securities, stockbrokers or dealers | 0.02% MDR, capped at ₹300. The stated rate is for these named categories, not all financial services. |
These figures and categories are those specified in the Ministry’s release. It says MDR is shared among banks, payment service providers and UPI application providers, and is neither a tax nor a charge collected by the Government or NPCI. See the Ministry’s stated MDR framework.
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What the ₹2,000 threshold means
The ₹2,000 amount separates customer-free merchant payments from the stated MDR schedule for some merchant transactions. It is not a general UPI transfer limit: P2P transfers remain free regardless of amount, according to the Ministry. Nor does a payment above ₹2,000 automatically mean the customer owes a fee. The specified MDR is on the merchant side, subject to the small-merchant and sector rules above.
How many merchant payments may be affected?
The Ministry estimates that roughly 96% of P2M transactions will remain unaffected because they are below ₹2,000 or are covered by the small-merchant zero-MDR framework; it expects about 4% of merchant transactions to attract MDR. These are government-reported estimates, not independent measurements. The same release says P2P transactions account for 70% of total transaction value and describes that value as outside the MDR framework. Source for the Ministry’s estimates.
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What customers should check if a UPI fee appears
If a shop adds a separate UPI surcharge, distinguish that amount from the MDR described in the Ministry’s release: the stated policy says banks should ensure merchants do not pass MDR to customers. Check the receipt or payment screen for what the charge is labelled, and ask the merchant to explain it. The cited release does not establish how every possible separate service charge or disputed transaction must be handled, so do not assume that every amount associated with a purchase is MDR.
For UPI payments funded through a prepaid payment instrument (PPI or wallet), NPCI’s FAQ says full-KYC PPI holders can pay and receive through UPI, and that customers are not charged for PPI-on-UPI transactions or for receiving funds that way. See NPCI’s UPI FAQ. That FAQ excerpt does not establish the current merchant-side pricing for every wallet payment route, so the bank-account MDR schedule should not automatically be applied to all wallet-funded merchant payments.
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Why some older UPI charge explanations differ
The Ministry’s 8 August 2026 announcement described a proposed legislative change as an enabling step: after the proposed Taxation and Other Laws (Amendment) Bill, 2026 passed, an NPCI-headed UPI and Services Steering Committee would decide MDR, if any. It also stated that consumers making payments would not face transaction charges. Read the 8 August announcement.
The later 15 September release sets out specific MDR rates, thresholds, merchant conditions and customer protections. As of 4 October 2026, that is the latest rate schedule stated in the cited Ministry material. The exact date the schedule became operational and the operative NPCI circular or order are not established by the accessible official pages; the Ministry’s release should not be treated as proof of a specific commencement date.
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What merchants should verify
A merchant’s category and monthly UPI QR receipts can affect whether the zero-MDR treatment applies. The stated rule is specifically for P2PM merchants receiving up to ₹1 lakh per month through UPI QR; it is not a blanket exemption for every business described informally as small.
- Confirm how the business and its payments are classified, including whether it falls under P2PM.
- Check whether monthly receipts through UPI QR meet the stated ₹1 lakh condition.
- For payments above ₹2,000, verify whether the transaction falls under a named sector rate or the specified general P2M schedule.
- Ask the acquiring bank or payment service provider how the stated MDR is applied and distributed, and review the provider’s contract for any separate terms. MDR alone does not establish a provider’s full pricing.
The Department of Financial Services lists an FAQ on MDR for select UPI P2M transactions dated 15 September 2026, but the linked document’s contents are not established here. See the Department of Financial Services MDR FAQ listing.
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