iTechGuides is reader-supported. When you buy through links on our site, we may earn an affiliate commission. As an Amazon Associate I earn from qualifying purchases. Learn more
For customers, UPI remains free for person-to-person transfers of any amount, and merchant payments up to and including ₹2,000 carry no UPI charge. Qualifying small P2PM merchants also retain zero MDR on all QR transactions when their monthly UPI receipts are up to ₹1 lakh. For specified merchant payments above ₹2,000, MDR is charged within the merchant payment ecosystem—not to the customer—and the Ministry of Finance says banks should ensure merchants do not pass it on.
The current UPI fee rules at a glance
The Ministry of Finance’s explanation published through the Press Information Bureau on 15 September 2026 separates UPI fees by who is paying, the payment amount, and the merchant’s category. The ₹2,000 threshold applies to the specified person-to-merchant framework; it does not limit free person-to-person transfers.
| Payment situation | Customer charge | Merchant-side MDR treatment |
|---|---|---|
| Person to person (P2P) | None, regardless of amount | Not applicable as a merchant transaction |
| Person to merchant (P2M), up to and including ₹2,000 | None | Zero MDR |
| Qualifying small P2PM merchant receiving up to ₹1 lakh per month through UPI QR | None | Zero MDR on all transactions |
| Specified P2M payment above ₹2,000 | None under the Ministry’s customer-protection explanation | Generally 0.4%, capped at ₹300 for transactions of ₹75,000 and above |
| Essential or thin-margin sector above ₹2,000 | None | ₹5 per transaction, for listed examples such as railways, telecommunications, insurance, fuel and agricultural inputs |
| Capital-market-related payment | None | 0.02%, capped at ₹300; examples include mutual funds, securities, stockbrokers and dealers |
These are the rates and categories described by the Ministry. The complete operational classification list and the underlying notification or NPCI circular were not available in the published explanation, so a merchant should confirm its exact category before changing settlement or pricing systems.
Quick wins for a faster PC:
Fix the driver behind crashes, sound loss and screen glitchesFind Drivers →Repair Windows errors before they cause bigger problemsFix Now →Scan for outdated or missing drivers - takes under a minuteDriver Scan →What customers pay when using UPI
Person-to-person transfers are free at any amount
If one individual sends money to another individual, the Ministry’s September 2026 explanation says there is no transaction, platform or other UPI charge for either sending or receiving the payment. This remains true regardless of the amount. A transfer of ₹500 and a transfer of ₹50,000 are both covered by the P2P rule.
#1 Best Overall
Do not apply the ₹2,000 threshold to P2P transfers. That threshold belongs to the specified merchant-payment framework.
Merchant payments up to ₹2,000 are free for the customer
For a normal customer-to-merchant UPI payment, the stated zero-MDR band covers amounts up to and including ₹2,000. A payment of exactly ₹2,000 is therefore inside the zero-MDR limit. The Ministry says customers do not pay a UPI transaction charge for these payments.
A payment above ₹2,000 does not automatically create a customer fee
When a merchant payment exceeds ₹2,000, the Ministry describes MDR as a charge within the merchant payment ecosystem. It is not presented as a fee collected from the customer. The release advises banks to ensure that merchants do not transfer MDR to customers, and it says UPI application providers are prohibited from adding platform or hidden fees.
Free tools Windows power users keep installed
One-click scans. No signup required.
A merchant can still set a normal price for its goods or services. That is different from adding a separate payment surcharge merely because the customer chose UPI. If a merchant displays an extra “UPI charge,” keep the receipt and payment details and ask the merchant to identify whether it is a product or service charge or a payment surcharge. The government explanation does not resolve individual merchant disputes.
Rank #2
- Payroll Record Book for Small Busines：This payroll record book is designed for small business owners contractors and offices to easily track employee payroll information helping simplify bookkeeping and payroll management
- Weekly and Daily Time Sheet Log Book for One Year：Designed as a weekly payroll record book and daily time sheet log book it tracks weekly hours pay rates taxes and deductions for up to 52 weeks providing full year employee payroll and time tracking in one book
- Large 8.5 x 11 Inches with 106 Pages：The payroll record book measures 8.5 x 11 inches with 106 pages offering ample space for detailed payroll records employee time tracking and work hours logs without overcrowding
- Tracks Payroll for Up to 20 Employees：This employee payroll record book and work hours log allows recording payroll data for up to 20 employees with clear columns making it suitable as an employee time tracking book for small teams
- Eye Friendly Design with Durable Spiral Binding：Blue green inner pages reduce eye strain during long bookkeeping sessions while the horizontal spiral bound design and laminated cover ensure durability and easy flat writing for daily payroll and time sheet logging
How MDR works for merchants
MDR is an ecosystem charge, not a government fee
Merchant discount rate, or MDR, is the fee shared within the payment ecosystem among participants such as banks, payment service providers and UPI application providers. The Ministry explicitly says MDR is neither a tax nor a fee collected by the Government or NPCI.
The amount a merchant ultimately sees in settlement can depend on its acquiring bank, payment service provider, category code and contractual terms. The published Ministry explanation establishes the policy rates and customer protection, but it does not provide every acquiring-bank settlement rule.
General rate for specified P2M payments above ₹2,000
For specified merchant payments above ₹2,000, the general MDR described by the Ministry is 0.4%. For a ₹3,000 transaction, 0.4% works out to ₹12 before any contractual or settlement adjustments. For a ₹75,000 transaction, 0.4% equals ₹300. For transactions of ₹75,000 and above, the stated cap is ₹300 per transaction, so a ₹100,000 payment would not produce more than ₹300 under that cap.
The rate is not a universal charge on every payment above ₹2,000. The Ministry limits it to specified P2M transactions and identifies separate treatment for qualifying small merchants, essential sectors and capital-market payments.
Rank #3
- Made in USA - Proudly produced in Ohio by a Veteran-owned business
- Includes pages to record payroll by weeks and quarterly
- Pages to record Depository Payments by Month
- Pages to record yearly totals up to 50 employees
- Pages to record monthly totals Reorder SKU: LOG-104-7CW(Payroll)
Essential and thin-margin sectors
For listed essential or thin-margin sectors, the Ministry describes a flat MDR of ₹5 per transaction when the payment is above ₹2,000. Examples in the explanation include railways, telecommunications, insurance, fuel and agricultural inputs. These examples should not be treated as the complete classification list; the merchant’s official category determines whether the flat rate applies.
Capital-market-related payments
Payments connected with capital-market activities are described at 0.02%, with a cap of ₹300 per transaction. The Ministry gives mutual funds, securities, stockbrokers and dealers as examples. This is a sector-specific rate, not the default rate for an ordinary retail purchase.
The separate zero-MDR rule for small P2PM merchants
Street vendors and other qualifying small merchants in the P2PM category retain zero MDR on all transactions when they receive up to ₹1 lakh per month through UPI QR codes. This condition is separate from the ₹2,000 payment threshold.
Recommended Free Tools
- It concerns the merchant’s category, not every merchant with a small turnover.
- It uses monthly UPI QR receipts, with the stated limit of ₹1 lakh.
- It applies to qualifying P2PM merchants, rather than automatically to all shops or service providers.
- It provides zero MDR on all transactions within the qualifying framework, including transactions above ₹2,000.
A merchant should not assume that a low-value month, a personal QR code or a different payment channel automatically qualifies. Category and onboarding records matter, and the detailed operational definitions must be checked with the acquiring institution.
Worked examples
| Example | Rule applied | Result |
|---|---|---|
| Friend sends you ₹20,000 | P2P transfer | No UPI charge to either individual |
| Customer pays a store ₹2,000 | P2M payment at the upper zero-MDR limit | No customer UPI charge; zero MDR under the stated band |
| Customer pays a specified merchant ₹3,000 | General rate of 0.4% | Merchant-side MDR described as ₹12; customer should not be charged a UPI fee |
| Customer pays ₹80,000 in a specified category | 0.4% subject to the ₹300 cap for transactions of ₹75,000 and above | Merchant-side MDR capped at ₹300 |
| Customer pays ₹4,000 for a qualifying essential-sector service | Flat essential-sector rate | Merchant-side MDR described as ₹5 |
| Customer pays ₹10,000 for a capital-market-related service | 0.02% capital-market rate | Merchant-side MDR described as ₹2, subject to the ₹300 cap |
| Qualifying street vendor receives ₹1.2 lakh through QR in a month | Exceeds the stated ₹1 lakh P2PM monthly condition | Do not assume the small-merchant zero-MDR treatment continues; confirm classification and settlement rules |
Why older articles say UPI has zero MDR
Government statements changed between 2025 and 2026. In an April 2025 Ministry of Finance release, the government said MDR on P2M UPI transactions had been removed effective January 2020 and that no MDR was then being charged. That statement accurately describes the position at that time.
The later Ministry explanation dated 15 September 2026 describes a different framework: P2P remains free, P2M payments up to ₹2,000 remain at zero MDR, qualifying small P2PM merchants retain zero MDR, and specified payments above ₹2,000 can carry merchant-side MDR. The April 2025 statement should therefore be read as historical, not as the current nationwide rule.
The 2026 explanation says the framework was introduced under the Payment and Settlement Systems Act, 2007 after deliberations by the UPI Steering Committee. It does not, by itself, provide the complete commencement wording or every category definition. Merchants implementing software, contracts or accounting changes should verify the underlying legal notification and operational circular.
MDR, GST and other charges are different questions
MDR is not GST
MDR and GST should not be treated as interchangeable. The April 2025 Ministry statement said that, under the then-current zero-MDR P2M position, there was consequently no GST applicable to those transactions. That explanation was tied to the 2025 policy context.
The September 2026 release describes a later MDR framework but does not set out the GST treatment for every type of MDR or every merchant arrangement. Do not extend the older “no GST” conclusion to the 2026 framework without current tax advice or an applicable tax clarification.
UPI charges are not the same as bank limits
Daily or per-transaction UPI limits are security and risk-management controls set through banks and the payment network. They determine how much you can send, not what you are charged. Reaching a bank or app limit does not mean a fee has been applied.
Prepaid instruments and PPI questions
NPCI’s customer FAQ includes a question about charges for prepaid payment instruments on UPI transactions. That material concerns PPI interoperability and should not be expanded into a statement about every UPI funding source or the 2026 merchant MDR framework. A customer using a wallet or other prepaid instrument should check the terms for that product as well as the UPI rules.
The Tool Desk
Outbyte PC Repair FREERepair Windows errors before they cause bigger problemsFix Now →Outbyte Driver Updater FREEScan for outdated or missing drivers - takes under a minuteDriver Scan →What customers should do if a fee appears
- Check whether the payment was P2P or P2M and record the amount.
- For a merchant payment, note whether it was ₹2,000 or less, exactly ₹2,000, or above ₹2,000.
- Review the receipt or invoice to distinguish the advertised price of the goods or service from a separate payment surcharge.
- Ask the merchant to explain any line labelled “UPI fee,” “MDR,” convenience charge or similar wording.
- Keep the transaction ID, receipt, date, merchant name and screenshots if the explanation is unclear.
- Raise the issue with the acquiring bank, payment app or bank support channel if a separate UPI surcharge is being demanded. The Ministry’s stated position is that MDR is merchant-side and should not be passed to the customer.
This process cannot determine whether a merchant’s underlying product price is lawful or appropriate; it only helps separate a product charge from a payment-related surcharge.
What merchants should verify before changing prices or systems
- Confirm whether the business is classified as P2M or qualifying P2PM.
- Confirm the monthly QR-receipt measurement and whether the ₹1 lakh condition is met.
- Ask the acquiring bank or payment service provider which category code applies to each payment stream.
- Check whether a payment is in an essential-sector or capital-market category rather than the general 0.4% category.
- Model the ₹300 cap for transactions of ₹75,000 and above.
- Review settlement reports instead of assuming that a displayed customer invoice equals the merchant’s net settlement.
- Do not add a UPI surcharge to customers merely to recover MDR; the Ministry says banks should ensure MDR is not passed on.
- Obtain the underlying notification or circular before relying on an edge-case classification or a particular implementation date.
How broad is the 2026 impact?
The Ministry reports that approximately 4% of merchant transactions would be subject to MDR under its analysis, while approximately 96% would remain unaffected because they fall below the ₹2,000 threshold or within the small-merchant zero-MDR framework. It also reports that 70% of total UPI transaction value remains outside the MDR framework.
These are Ministry-reported figures for 2026, not an independent recalculation. They describe the expected reach of the policy at an aggregate level and do not determine the rate for an individual merchant.
Bottom line for customers and merchants
Customers do not pay a UPI transaction fee for P2P transfers, and merchant payments up to ₹2,000—including exactly ₹2,000—remain in the zero-MDR band described by the Ministry. Qualifying small P2PM merchants receiving up to ₹1 lakh per month through QR retain zero MDR on all transactions. Above ₹2,000, only specified merchant categories enter the MDR framework, with a general 0.4% rate and caps or sector-specific rates. MDR belongs to the merchant payment ecosystem, not the customer’s bill, and the Ministry says it should not be passed through as a UPI surcharge.
Quick Recap
Product prices and availability are accurate as of the date/time indicated and are subject to change. Any price and availability information displayed on Amazon at the time of purchase will apply.
