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Reconcile UPI receipts from transaction to provider settlement to bank credit, and record a deduction as MDR only when the settlement detail, merchant agreement, fee schedule or invoice identifies and supports it. A lower bank credit alone does not prove that MDR was charged. This distinction matters especially in October 2026: an Income Tax Department page describes a zero-charge position for prescribed electronic modes, while a Department of Financial Services FAQ dated 15 September describes a different framework scheduled for 15 October. The operative instrument for that later framework has not been established here.
What to reconcile—and what a shortfall does not prove
A UPI payment, a provider settlement and a bank credit are three records of related but different events. The customer’s successful payment is not necessarily credited to your bank individually or on the same day: a provider may group receipts into a settlement batch, subtract documented refunds or other itemized deductions, and credit the net amount later.
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Start by matching the transaction-level payment export to sales and exceptions, then match the resulting batch to the provider’s settlement report, and finally match that net settlement to the bank statement. Keep any unexplained difference in a clearing or suspense account while you investigate it. Do not label it MDR merely because the bank credit is lower than the day’s gross sales.
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1Clear out junk files and repair common Windows errors2Fix the driver behind crashes, sound loss and screen glitches3Repair Windows errors before they cause bigger problemsRBI materials describe transaction-to-fund-flow matching and reconciliation as part of payment-intermediary services. That is useful context for the control; it does not identify the reason for a particular merchant’s deduction.
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Gather the records before posting a fee
- Transaction export: Obtain UPI transaction-level data for the period from the merchant app, acquiring bank or payment aggregator. Retain each UPI reference or transaction ID, transaction date, gross amount, available payer or transaction-type information, and refund or reversal status.
- Sales records: Keep the matching point-of-sale receipt, order record or other sales entry for each successful payment.
- Settlement detail: Obtain the provider’s batch report, batch ID, settlement date, gross captured receipts, listed refunds or reversals, deductions and net amount.
- Bank statement: Retain the credit date, amount and bank reference. A provider batch may be delayed, combined or split rather than appearing as a one-to-one credit.
- Fee support: Keep the merchant agreement, fee schedule, itemized settlement explanation, invoice and any relevant tax details. Check who charged the amount and what service it is described as.
Reconcile transactions, settlements and bank credits
- Establish expected gross receipts. Export the transactions for the period and total successful receipts. Keep identifiers and statuses in the workpaper so a payment can be traced to its sales record and settlement batch.
- Match payments to sales and exceptions. Match successful receipts to POS or e-commerce records. Identify pending, failed, reversed, refunded and duplicate records. Do not treat a failed or reversed payment as an undisputed settled sale.
- Rebuild each provider settlement batch. For each batch, compare successful captured receipts with documented refunds, reversals and itemized deductions. Allow for documented cutoff or settlement-timing differences, and retain the batch ID and settlement date.
- Tie the net batch to the bank. Match the provider’s net settlement to bank credits by date, amount and reference. If a batch is combined, split, delayed or net of separately identified items, maintain a bridge schedule instead of forcing a one-to-one match.
- Post supported amounts transparently. A general bookkeeping pattern is to debit bank for cash received, debit a separately supported merchant-fee expense (and any properly documented tax component where your accountant confirms the treatment), and credit the payment-clearing or receivable account for the gross settlement obligation. Post sales, taxes, refunds and chargebacks separately under your accounting policy.
- Investigate and close differences. Age unmatched amounts by batch. Ask the provider to explain unexplained deductions, suspected duplicate fees, reversals, wrong merchant categorization or timing issues. Keep corrected settlement detail or credit notes with the period reconciliation and record the resolution and reviewer.
This journal pattern is workflow guidance, not a prescribed entry or tax advice. The sources described here do not determine the GST or accounting treatment for a particular merchant or provider charge.
Distinguish MDR from other provider charges
MDR, a contractual payment-provider fee, equipment rental or subscription, and a separately billed service are not interchangeable labels. Before posting a deduction as MDR, compare the payment type and transaction date with the public policy described for that date, then check the merchant’s classification and terms. Also compare the fee description and payee in the settlement report, agreement and invoice. A dashboard entry by itself does not establish that a deduction is MDR or that it is permitted under the merchant’s terms.
- UPI bank-account person-to-merchant (P2M): Check whether the transaction falls within the relevant policy description and date, and whether a stated merchant exemption applies.
- Person-to-person (P2P) or credit-linked payment: Do not assume a policy description for bank-account P2M transactions covers a different payment type. Confirm the transaction type shown by the provider and the applicable terms.
- Provider or equipment charge: Check the contractual payee, service description, settlement detail and invoice. Public MDR policy does not, by itself, settle whether a separate contracted service or equipment charge applies.
UPI fee policy in October 2026: read the dates carefully
The official statements available for the two dates below are not the same thing as proof of an operative implementing instrument. The Income Tax Department page explains the existing Section 10A / Circular 32/2019 position; the later government FAQ describes a framework scheduled to start on 15 October 2026. As of 7 October 2026, the operative instrument implementing that later schedule has not been established here. Do not treat the scheduled terms as already in force on 7 October or rely on the FAQ alone to decide how to post a later deduction.
| Official source and date | What it says | How to use it in reconciliation |
|---|---|---|
| Income Tax Department page explaining Section 10A and Circular 32/2019 | Section 10A bars banks and system providers from imposing charges on a payer or beneficiary using electronic modes prescribed under section 269SU. The page lists RuPay debit card, BHIM-UPI and BHIM-UPI QR, and says Circular 32/2019 clarified that charges, including MDR, were not applicable on those modes from 1 January 2020. | It describes the zero-charge position for the prescribed modes; do not silently combine it with the later FAQ’s scheduled framework. |
| Government of India press release, 8 August 2026 | Describes a proposed amendment to Section 10A and says the NPCI-headed UPI and Services Steering Committee would decide MDR, if any, once Parliament passed the bill. | A proposal description is not proof that the bill passed or that an implementing instrument took effect. |
| Department of Financial Services FAQ, 15 September 2026 | Describes provisions scheduled for 15 October 2026: 0.4% for standard UPI P2M transactions above ₹2,000, capped at ₹300 for transactions of ₹75,000 and above; payments up to ₹2,000 are described as unaffected. It also describes zero MDR for small merchants categorized P2PM receiving up to ₹1 lakh per month through UPI QR, as well as special fee categories. | Treat these as terms described by the FAQ and tied to its stated start date—not as independently verified operative law. Check the current official instrument and your provider terms before recording a post-effective-date MDR entry. |
The same FAQ characterizes more than 95% of UPI P2M transaction volume as at or below ₹2,000. That is the FAQ’s characterization, not an independent recalculation here. Do not infer from that volume statement that a particular payment is exempt: verify its amount, type, date and merchant classification against the applicable official instrument and provider records.
Keep a workpaper that explains every difference
A useful period reconciliation is a traceable record, not a prescribed regulatory form. Include these fields so another reviewer can follow each amount from sale through settlement to bank:
- Transaction date and UPI transaction ID
- Sale or order ID and gross receipt
- Refund or reversal status and amount
- Provider batch ID or reference and expected settlement date
- Actual bank-credit date, amount and bank reference
- Itemized deduction, stated fee type and payee
- Invoice number and tax amount, if invoiced
- Difference, explanation, resolution and reviewer/date
Where a deduction remains unsupported, leave it identified as an unresolved difference rather than reclassifying it as MDR. For any post-15 October 2026 entry, verify the operative official instrument and the merchant’s acquiring or provider terms before applying the FAQ’s scheduled framework.
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