New Delhi: UPI users will continue to make payments without transaction charges even after a new Merchant Discount Rate (MDR) system begins on October 15, 2026.
Under the new framework, merchants will pay 0.4% MDR on direct UPI payments above Rs 2,000. The fee will be capped at Rs 300 for transactions of Rs 75,000 or more. A Rs 3,000 payment, for example, would cost the merchant Rs 12 in MDR, while the customer still pays Rs 3,000.
The charge cannot be separately passed on to customers, and UPI apps cannot add platform fees. Person-to-person transfers will also remain free.
More than 95% of standard P2M UPI transactions by volume are below Rs 2,000 and will remain unaffected.
Small merchants under the P2PM category, receiving up to Rs 1 lakh monthly through eligible UPI QR payments, will continue to be exempt.
Certain sectors, including fuel, insurance, telecom and railways, will have a flat Rs 5 MDR on qualifying payments above Rs 2,000. Capital-market transactions will attract 0.02% MDR, capped at Rs 300.
The government said the revenue will help fund UPI infrastructure, cybersecurity, innovation and digital-payment expansion.