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No—not as a separate UPI MDR surcharge under the framework announced by India’s Ministry of Finance. The Department of Financial Services (DFS) says onboarded merchants cannot pass UPI MDR charges to customers. The framework is due to take effect on 15 October 2026; as of 13 October 2026, it has not yet reached its announced start date.
What the government has said about UPI surcharges
The Ministry of Finance’s 15 September 2026 release says UPI MDR is a charge within the merchant payment ecosystem, not a charge on customers making UPI payments. It says banks have been advised to ensure merchants do not pass the charge on. The DFS FAQ is more categorical: “No, merchants on-boarded cannot pass on MDR charges to customers while accepting payments through UPI.” Ministry of Finance, 15 September 2026; Department of Financial Services FAQ, 15 September 2026.
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So if a merchant adds a separate fee to your bill specifically for paying by UPI, that is contrary to the announced pass-through rule. The Ministry describes an operational direction to banks, while the FAQ says onboarded merchants cannot pass MDR on. The materials do not identify a specific penalty or explain how a consumer should file a complaint about a surcharge.
This answer is about passing MDR to a customer as a separate UPI fee. The materials reviewed do not determine whether an ordinary change to a product’s listed price, or an unrelated disclosed service charge, is treated the same way.
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Which UPI transactions have MDR under the announced framework?
MDR means merchant discount rate: a charge associated with accepting a merchant payment, distributed among payment-ecosystem participants such as banks and payment application providers. The Ministry says it is not a tax collected by the government or NPCI. Under the announced framework, whether MDR applies depends on the transaction, amount, merchant classification and category—not simply on whether the customer scans a QR code. Ministry of Finance release; DFS FAQ.
| Transaction or merchant category | Announced MDR treatment |
|---|---|
| Person-to-person (P2P) UPI transfer | Free regardless of amount. |
| Person-to-merchant (P2M) payment of ₹2,000 or less | Free of MDR. |
| Qualifying small merchant in the P2PM classification | Free of MDR if the merchant receives up to ₹1 lakh per month through UPI QR codes. |
| Specified P2M payment above ₹2,000 under the standard category | 0.4%; for transactions of ₹75,000 and above, capped at ₹300 per transaction. |
| Payment above ₹2,000 in listed essential or thin-margin sectors | Flat ₹5 MDR. Listed sectors include railways, telecommunications, insurance, fuel and agricultural inputs. |
| Payment involving mutual funds, securities, stockbrokers or dealers | 0.02%, capped at ₹300. |
These are merchant-side MDR terms, not permission to add the listed amount to a customer’s UPI bill. A payment’s category and the merchant’s classification matter; do not assume the standard 0.4% rate applies to every merchant payment. Ministry of Finance release; DFS FAQ.
When does the framework start, and how broad is it?
The DFS FAQ gives 15 October 2026 as the effective date. Until then, describe these terms as announced provisions due to take effect, rather than rules that have already started. The Ministry estimates that approximately 96% of all P2M transactions will remain unaffected, with MDR applying to about 4% of merchant transactions. Separately, the DFS FAQ says more than 95% of total UPI P2M transaction volume is at or below ₹2,000; that is a transaction-volume figure, not the same measure as the Ministry’s estimate of the share of merchant transactions unaffected. Ministry of Finance release; DFS FAQ.
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The Ministry previously described an amendment to section 10A of the Payment and Settlement Systems Act, 2007 as an enabling provision, with MDR parameters to be decided after passage of the Taxation and Other Laws (Amendment) Bill, 2026. Its later September release announced the framework and rates. For the current announced terms, the September release and DFS FAQ are the relevant sources. Earlier zero-MDR policy for BHIM-UPI and RuPay debit cards had applied since January 2020; the 2026 framework marks a policy change. Ministry of Finance, 8 August 2026; Prime Minister’s Office, FY 2024–25 announcement.
Independent reader supportYour contribution helps us test, update, and keep practical guides available for everyone.What to do if a merchant adds a UPI fee
If a bill includes a separate UPI charge, first check whether it is explicitly presented as an MDR or UPI payment surcharge, rather than a change in the listed price or a different charge. Keep the bill or receipt and note the merchant, date and amount. The official materials reviewed state the pass-through rule but do not specify a complaint channel, regulator route or penalty for an individual surcharge, so this article cannot identify a formal escalation process.
Do not treat older or adjacent rules as a substitute for the 2026 UPI-specific framework. An RBI publication reviewed concerns debit-card acceptance, not the direct basis for this UPI rule. A Lok Sabha answer from 18 August 2025 describes the position at that earlier date and predates the announced 2026 framework. RBI publication on debit-card MDR; Lok Sabha answer, 18 August 2025.
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