For a standard UPI payment made directly from a bank account in India, neither the customer nor the merchant pays a transaction charge. The answer can differ when a payment uses a prepaid wallet, a linked credit product, or an international currency conversion, so check the funding source and transaction type before treating a displayed amount as a general “UPI fee.”
Who pays for a regular bank-account UPI payment?
For bank-account-to-bank-account UPI payments, NPCI says transactions remain free for both customers and merchants. Its 29 March 2023 clarification states: “These Bank account-to-account transactions continue to remain free for Customers and Merchants.” This is the direct answer for the ordinary domestic UPI payment funded from a bank account.
The legal backdrop is section 10A of the Payment and Settlement Systems Act, 2007. It says a bank or system provider may not impose, directly or indirectly, a charge on a person making or receiving a payment using electronic modes prescribed under section 269SU of the Income-tax Act, 1961. NPCI’s statement is the specific guidance on ordinary bank-account UPI transactions; the statute should not be read as a claim about every product or fee associated with a payment.
When a UPI payment uses a wallet
Interoperable prepaid payment instrument (PPI) wallets are treated differently from a direct bank-account payment. NPCI says interchange applies only to PPI merchant transactions and that customers are not charged. Its clarification says: “The interchange charges introduced are only applicable for the PPI merchant transactions and there is no charge to customers.”
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Interchange is a charge between payment participants, not automatically a fee added to the customer’s bill or a deduction from every UPI merchant’s settlement. NPCI’s current FAQ also addresses customer charges for PPI-on-UPI transactions. For a particular wallet payment, check the payment screen and the relevant provider’s terms rather than assuming that all UPI payments follow the same funding rules.
How linked credit and merchant categories affect the answer
A RuPay credit card linked to UPI is not the same funding source as a bank account or PPI wallet. NPCI’s cited operating circular specifies nil MDR—including no interchange, PSP, or app-provider charges—for small offline merchants on transactions up to ₹2,000. That is a scoped rule: it should not be generalized to every credit-card-linked UPI payment, merchant category, or transaction amount.
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Before drawing a conclusion about a card-linked payment, identify the funding instrument, whether the recipient is a merchant or an individual, the merchant category, and the transaction amount. The cited circular establishes the small-offline-merchant rule, not a universal charge rule for every card-linked transaction.
Independent reader supportYour contribution helps us test, update, and keep practical guides available for everyone.Domestic transfers, merchant payments, and international purchases
NPCI distinguishes person-to-person transfers (P2P) from person-to-merchant payments (P2M). That distinction matters because some charges discussed in payment-system rules concern merchant transactions, not every transfer between individuals.
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International merchant payments need separate scrutiny. NPCI advises users to review the final amount in both currencies and any applicable exchange rates or fees. The domestic rule for bank-account UPI does not establish that a cross-border purchase has no currency-conversion cost. Use the final payment details and the applicable provider terms to see what is being charged.
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How to check a UPI charge on a specific transaction
- Open the receipt or transaction details. Note the amount, recipient, and any separately displayed fee or conversion information.
- Identify the funding source. Determine whether the payment came directly from a bank account, a PPI wallet, or a RuPay credit card linked to UPI.
- Identify the recipient and transaction category. Check whether it was P2P or P2M; for a merchant payment, note whether the merchant was offline and whether the transaction was up to ₹2,000 if the RuPay credit-card rule may apply.
- Check for currency conversion. For an international merchant, compare the final amounts in both currencies and review any exchange rate or fee shown in the payment flow.
- Compare the disclosure with provider terms. If a fee is disputed, use the receipt and the relevant bank, app, wallet, or merchant disclosure to establish what it relates to. The general rules do not determine every provider’s terms or merchant agreement.
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