UPI Charges Clarified: Free for Consumers & Small Merchants in India

The Indian government has decisively clarified that the Unified Payments Interface (UPI) will continue to operate without transaction fees for consumers and small merchants. This statement addresses recent concerns regarding the potential introduction of new charges on the widely adopted digital payment system.

Any Merchant Discount Rate (MDR) charges, if implemented, would only apply to a restricted subset of merchant transactions that surpass a specific monetary threshold. These charges would be nominal, significantly lower than the rates typically associated with debit or credit card transactions, ensuring the vast majority of UPI merchant transactions remain free.

Key Details on Potential UPI Charges

• MDR could range from 0.25% to 0.4%.
• Applicable only to business-to-business (B2B) UPI transactions.
• Charges would apply to transactions exceeding ₹2,000.
• Person-to-person (P2P) payments will remain entirely unaffected.

The final decision on any MDR implementation rests with the UPI and Services Steering Committee, which operates under the National Payments Corporation of India (NPCI). This committee’s determination will follow the parliamentary approval of the Taxation and Other Laws (Amendment) Bill, 2026.

This comprehensive bill proposes amendments to several key financial statutes, including the Payment and Settlement Systems Act, 2007, the Income-tax Act, 2025, and the Finance Act, 2026. Such legislative changes would empower the government to introduce the specified MDR on larger B2B transactions.

The overarching goal of these potential amendments is to bolster the sustainability and technological advancement of the UPI ecosystem. Ensuring preparedness for future risks and facilitating the network’s expansion into India’s rural and semi-urban areas are also central objectives.