UPI Charges From 15 October 2026: Who Pays the New 0.4% MDR and Who Doesn't, Explained
From 15 October 2026, some UPI payments to merchants above Rs 2,000 attract a merchant discount rate of 0.4 percent, capped at Rs 300. Customers pay nothing extra, person-to-person transfers stay free, and small merchants are exempt. Here is exactly how the new UPI charges work.
For years, UPI has been free for everyone. From 15 October 2026, that changes for some merchant payments. A merchant discount rate (MDR) of 0.4 percent now applies to certain UPI payments to merchants above Rs 2,000. Before you worry: customers do not pay, person-to-person transfers stay free, and small shopkeepers are exempt. Here is exactly how the new charges work.
A quick note: this explainer is based on NPCI's published FAQs and public reporting. Check official NPCI, RBI or Finance Ministry notices for final details.
The 60-second version
- Start date: 15 October 2026.
- Who pays: Merchants only. They cannot pass it on to customers.
- The rate: 0.4 percent on specified merchant payments above Rs 2,000, capped at Rs 300.
- Free: All P2P transfers, and merchant payments of Rs 2,000 or less.
- Exempt: Small merchants receiving up to Rs 1 lakh a month via UPI QR.
- Special rates: Rs 5 flat for fuel, railways, telecom, insurance; 0.02 percent for capital markets.
What is MDR?
The merchant discount rate is a fee a merchant pays for accepting digital payments. Card payments have always carried MDR, typically 1.5 to 2.5 percent for credit cards. UPI has been an exception. NPCI says the new charges will fund infrastructure, cybersecurity, fraud prevention and innovation in the UPI ecosystem, and stresses that MDR is not a government tax.
How much merchants pay
| Payment amount | MDR at 0.4% |
|---|---|
| Rs 2,000 or less | Free |
| Rs 3,000 | Rs 12 |
| Rs 50,000 | Rs 200 |
| Rs 75,000 and above | Rs 300 (cap) |
Special categories
| Category | Charge above Rs 2,000 |
|---|---|
| Railways, telecom, insurance, fuel, other notified sectors | Rs 5 flat per transaction |
| Capital markets (mutual funds, stockbrokers, investment platforms) | 0.02%, capped at Rs 300 |
| Educational institutions | Concessional or capped rates |
Who is exempt
- Person-to-person (P2P) transfers, at any value.
- Merchant payments of Rs 2,000 or less, which NPCI says make up more than 95 percent of UPI merchant transactions by volume.
- Small merchants who receive up to Rs 1 lakh a month through UPI QR codes, with no GST registration required.
- Credit-linked UPI, such as RuPay credit cards on UPI, which stays under existing credit card rules.
What it means for you
For customers: Nothing changes at checkout. You pay the listed price. If a merchant tries to add a "UPI fee", that is not allowed under the framework, and UPI apps are also barred from charging platform fees.
For small shopkeepers: If your UPI collections are under Rs 1 lakh a month, you pay nothing. Existing QR codes keep working.
For larger businesses: High-value UPI payments now carry a cost, though still far below card MDR. Businesses may weigh this when choosing how to accept payments.
What to watch next
- Final notifications from NPCI and the RBI confirming the details.
- The small merchant fund, proposed to support UPI expansion in smaller towns and the Northeast, to be finalised with the RBI.
- Merchant behaviour. Whether some businesses push customers towards cash or other modes for big payments.
This article is for information only and is not financial advice. Details are based on NPCI's published FAQs and public reporting, and may change with final notifications.
Frequently asked questions
›Will I have to pay charges on UPI from 15 October 2026?
No. Customers do not pay anything extra. The new merchant discount rate (MDR) is paid by merchants, and merchants are not allowed to pass it on to customers. Person-to-person UPI transfers remain completely free regardless of amount.
›Which UPI transactions attract MDR?
Under the framework explained in NPCI's FAQs, specified person-to-merchant UPI payments above Rs 2,000 attract an MDR of 0.4 percent, capped at Rs 300 per transaction. Payments of Rs 2,000 or less remain free. Whether a payment is charged also depends on the merchant's category and eligibility.
›Are small shopkeepers charged MDR on UPI?
No. Small merchants who receive up to Rs 1 lakh a month through UPI QR codes are exempt from MDR under the framework. GST registration is not required for this exemption.
›What are the UPI charges for fuel, railways and insurance?
For railways, telecom, insurance, fuel and other notified categories, payments above Rs 2,000 attract a flat Rs 5 per transaction instead of 0.4 percent. Capital market payments, such as mutual fund investments, are charged at 0.02 percent, capped at Rs 300.
›Does the UPI MDR apply to RuPay credit cards on UPI?
No. Credit-linked UPI payments, including RuPay credit cards on UPI and pre-sanctioned credit lines, are not covered by this framework and remain under existing credit product rules.